Defense Ministry forced to renegotiate terms of 25-billion-euro debt

Government cannot meet repayments for purchases of new tanks, military aircraft and ships

Spain's Defense Ministry has been forced to restructure the terms of payment on a 25-billion-euro debt it owes for new equipment including tanks, military aircraft and ships. The repayment will be extended five additional years until 2030.

Having embarked on an unprecedented modernization plan over the last decade, the Spanish military now boasts some of the most advanced hardware in the world, including the Eurofighter Typhoon, Leopard tanks and F-100 combat system-equipped air-defense frigates. The problem is that now it can't pay for them.

The combined price tag for the 19 new high-tech armament programs was over 30 billion euros, or roughly three percent of Spain's GDP. So far, the defense ministry has repaid just five billion of this.

The remainder was supposed to be paid in annual installments up to 2025, but the Ministry has said that this is now impossible without a vastly increased budget, an unlikely scenario given Spain's intention to reduce its deficit to six percent by the end of this year, and to three percent by 2013.

Unfortunately, the situation is not likely to improve. The terms of repayment were set up so that installments were lowest during the first few years, a period that coincided with Spain's most recent boom years.

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