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Public debt to top 100 percent of GDP in 2015

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Public debt to top 100 percent of GDP in 2015
Photo of the Spanish Parliament in Madrid: Shutterstock
09:37 CEST+02:00
Spain's public debt ratio will top the symbolic level of 100 percent of national output next year, well above European Union guidelines, before it starts dropping in 2017, the government's 2015 budget proposal showed on Tuesday.

The eurozone's fourth-biggest economy is set to end the year with a debt ratio equal to 97.6 percent of the country's gross domestic product (GDP), the proposal handed to parliament predicted.

The debt ratio will climb to 100.3 percent of GDP in 2015 and 101.5 percent a year after, before dropping to 98.5 percent in 2017.

European Union rules say that debt owed by governments must not exceed 60 percent of GDP, or be falling significantly towards this ratio.

Spain enjoyed a relatively low debt ratio, equal to 36.3 percent of GDP, before the start of the global financial crisis in 2007.

But public debt soared after the implosion of a decade-long property bubble, and passed €1 trillion ($1.3 trillion) in August.

Spain emerged from the latest two-year downturn in mid-2013 and grew in the second quarter of 2014 at a faster-than-expected quarterly rate of 0.6 percent.

The government forecasts the Spain's economy will grow 1.3 percent in 2014, compared to a 1.2 percent contraction last year, bouncing back after six years of crisis that brought it close to financial collapse.

The draft 2015 budget, which was approved by Prime Minister Mariano Rajoy's cabinet on Friday, predicts the recovery will accelerate in 2015 to 2.0 percent growth.

Rajoy's conservative government has struggled to contain annual deficits by raising taxes, freezing public salaries and curbing spending on services such as education and healthcare, despite angry street protests.

The government's fresh public debt ratio forecasts are based on new EU accounting rules requiring illicit activities, such as prostitution and drug smuggling, to be counted in estimates of GDP.

When national output is recalculated under the new EU norms, Spain's public deficit as a percentage of GDP in 2013 was revised to 6.33 percent, down from 6.62 percent.

The Spanish government had promised Brussels to bring the public deficit down to 6.5 percent of GDP in 2013.

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