Spain Will Include Sareb’s Liabilities In The Total Public Debt, Which Will Rise To 120% Of GDP

Balance of Spain's bad bank SarebSpain's bad bank Sareb leaflet

Public debt could rise to 120% of GDP in 2020, due to a reclassification of €35 billion of the Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria (SAREB), Spain’s so-called “bad bank”, reports Expansión. In fact, Eurostat has forced Spain to digest the 35 billion of debt. With this accounting change, the level of Public Debt over GDP, which increased by more than 20 points over 2020 to 117% (1,311,298 M€) from 95.5% in 2019, would rise by about 3 additional points to 120%. These figures represent a breach of what was initially planned by the coalition government of PSOE and Podemos for the close of last year.

In addition, the public deficit will have to assume Sareb’s negative net equity at end-2020, data that will not be known until next week. However, that will foreseeably exceed the 7 billion euros it registered at the end of 2019, since it will incorporate the additional impairments of the past fiscal year.

The main problem is that the multi-million losses accumulated by the firm since its creation in 2012 have volatilised its equity, i.e. the capital and debt contributed by the owners.

To prevent the impact on public accounts from being even greater, the Government is considering extending Sareb’s life beyond 2027, the year in which its liquidation is scheduled.

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