Funcas warns that Spain should start reducing public debt “as soon as possible”


Foncas has warned Spain It should start lowering the public debt-to-GDP ratio Quickly, to anticipate “potentially negative” situations in financial markets, restore fiscal policy space and stop the increase in the cost of debt due to high interest rates.

This is how Santiago Lago explains it in an article in Quadernos de Informacion Economica. He also pointed out that before reforming the fiscal rules, Many eurozone countries are betting on depreciation One annual point in the debt-to-GDP ratio of the most indebted countries, such as in Spain, according to the EP.

The author commented on this in the next ten years financial sustainability is at stake, considered by the European Commission to be a high risk in the medium term. All this makes it imperative to “urgently” design and implement a gradual, continuous and sustainable integration plan.

Funcas insisted that public debt constituted one of the The main factors of economic weaknessinto spanish. In the current context of the implementation of the new European fiscal rules and the withdrawal of support from the European Central Bank, Raymond Torres and María Jesus Fernandez also raised the need to initiate a gradual reduction in the debt-to-GDP ratio.

They warned that “the persistence of high public deficits is a factor of weakness for Spain, especially when this year is expected to lead to an increase in public debt issues.” Added to this rise in profits, Which means an increase in interest payments relative to GDP.

slowed growth

Plus, for the authors, the short term comes Sharpening signs of weakness As a result of the monetary tightening cycle, growth will slow during the second part of the year.

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This slowdown, coupled with anti-inflationary measures, pension comparison and fiscal fee increases, It makes it more difficult to correct imbalances in the budget.

Deficit of 3.7% by 2024 and debt at 108% of GDP

Absent the adjustments, Funcas stated that the deficit would reach 3.7% in 2024, higher than the 3% estimated by the government, and public debt will exceed 108% of GDP, 10 points more than before the pandemic.

Entire Despite the resilience shown by the economy Spain in the first half of the year,” which the authors attribute to “the competitiveness of the export sector, the absence of a real estate bubble, and the low level of household debt.”

For his part, Jose Ramon Diez Guijaro warned that the dual mandate of central banks will be put to the test once severe tightening in financial conditions begins to cause sources of tension. And they add that «the periods of crisis experienced by some medium-sized banks in North America and in Credit Suisse revealed both Weak business models for some financial entities With solvency and/or liquidity problems, such as failures in regulation and supervision.”

Although the crisis “seems fairly stable, It’s a warning to central banks.” Of Funcas, they noted, the positive news is that, one quarter after tensions began in the US, the focus of financial pressures “seems to be fully contained.”

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