Spain’s public debt passes €1 trillion

Spanish public debt has passed a record €1 trillion, the Bank of Spain said on Thursday, ballooning to €1.007 trillion in June, up from €996 billion in May.

The landmark figure, representing 98.4% of last year’s GDP, comes after more than two-and-a-half years of austerity measures, tax hikes and wage freezes by the conservative Popular Party government of Prime Minister Mariano Rajoy. When he took office in late 2011, the debt was €737.4 billion, or 70.4% of GDP.

The government had several months ago come to terms with the fact that debt will reach 100% of GDP

The government had several months ago come to terms with the fact that debt will reach 100% of GDP, a figure that Spain had not seen in a century. Spain has traditionally enjoyed relatively low debt ratios: in 2007, on the eve of the crisis, it was just 36% of GDP, but the collapse of a decade-long property boom hit the country’s overextended banks hard – prompting a €41-billion EU bailout for the banking sector in summer 2012 – and pushed the economy into a double-dip recession.

The country enjoys relatively low inflation, but this will do little to reduce the debt-to-GDP ratio, which is measured on the basis of nominal GDP, and the debt weighs more heavily the less prices rise. Furthermore, Spanish growth, at just 0.6% in the second quarter, may be among the biggest in the euro single currency area, but is still fragile. Unemployment remains stubbornly high at almost 25 percent.