The total debt of the public administrations rose by 8.2% in July in comparison with the same month of the previous year, as a consequence of the greater expenditure derived from the coronavirus crisis. This increase adds up to almost €100 billion more in the last year, according to the data published on Thursday by the Bank of Spain.
Intermoney | There are important reasons for maintaining a prudent attitude with regard to the Spanish economy, situating its full recovery in the year 2023. This would mean that we would lose more than a decade of the fledgling 21st century. On the other hand, there are also reasons to hope the recovery will eventually take shape and not be too far off. These include the encouraging development of the COVID-19 vaccines, the decisive response from the ECB and the EU, and a lesser impact of the crisis than feared on large European partners and customers.
The European Commission (EC) urged the Spanish government to “carefully” evaluate the potential impact of any modifications to the 2012 labour reform and to “preserve “the most positive aspects of it, which “supported solid job creation” during the recovery phase. Citing a recent study from the International Monetary Fund (IMF), it states that “the labour reforms adopted in 2012-13 in response to the crisis have played an important role in promoting a rich recovery in employment which began in 2014.”
BancaMarch | The European Commission warns that Spain is moving away from the adjustment path and asks for measures that compensate the alignment of pensions with prices.
Now “the waters appear to have calmed” in Italy, analysts at Intermoney, however, believe we will see more episodes of tension originating in Italy. The key moment is likely to come at the end of the summer or in the autumn. This situation should be seen as a scenario for tension rather than rupture, although contagion to other peripheral economies could be possible.
For a long time, Spain has had a “debt pending” in terms of budgetary stability. And, for the time being, the current scenario leads us to think that balancing the public finances is a difficult objective to achieve in the medium-term. Added to that problem is the high level of government debt.
It’s almost certain that the Catalan crisis will prevent the Spanish budget from being approved, which will be a blow to political stability and the duration of the current legislature.
The European Commission has published its evaluation of the progress made by different countries towards their economic and social priorities. The report highlights that the Spanish economy is growing at a good pace and is gradually correcting its weaknesses. But there continue to be huge imbalances, like still high unemployment and the high levels of both public and private debt.
There are some items of Spanish public debt which are eliminated from Bank of Spain’s accounts, reducing the total figure. In other words, 450 billion euros ignored. Basically, what is being removed is public companies’ debt, the debt issued by a public institution in the hands of another public institution, as well as other adjustments, which really should not be discounted.
Spain’s public debt stood at 1.070 trillion euros in the fourth quarter, 7.562 billion euros more than in the previous one, according to Bank of Spain data. (datos del Banco de España).