GETS EVEN WORSE: Spanish-held debt will equal gross domestic product by 2014
Spanish situation reminds world that European debt crisis is ongoing
In a clear sign that the European debt crisis is far from over, Spain's debt will climb to almost 100 percent of national output by the end of 2014. According to the 2014 budget proposal handed to Parliament this week, it will be the highest level in more than a century.
In a clear sign that the European debt crisis is far from over, Spain's debt will climb to almost 100 percent of national output by the end of 2014.
Almost tripling after after property values burst in 2008, Spain's public debt has sent the country into a five-year long economic slump. The economic malaise is expected to continue rising for at least another three years, adding to the country's debt servicing costs at a time when it is fighting to reduce one of the euro zone's highest public deficits.
Treasury Minister Cristobal Montoro reiterated on Monday that new austerity measures wouldn't be necessary. His country has been under the gun to meet fiscal targets set by Brussels as Spain is expected to return to growth by the second half of this year.
"The budget for 2014 is an economic recovery budget. This budget will help us return to growth and create jobs in our country," Treasury Minister Cristobal Montoro said.
Unlikely to face any challenge in Parliament, the budget is expected to pass as the ruling People's Party has an absolute majority.
The budget also said pensions would rise by 0.25 percent through 2014 after a reform of the system passed last week aims to link pension hikes to economic health, the number of pensioners and the state of the social security system.
The Treasury would need to issue 243.9 billion euros of gross debt next year after budgeting for gross issuance of between 215 billion and 230 billion euros last year.
Most of the issued debt would be via bonds or T-bills. According to the budget document, the government would consider issuing up to 7 billion euros in other instruments or currencies if other interesting financing options arise.
"Despite a fall in financing costs this year, the increase in circulating debt means the financial burden will rise again in 2014," the budget said.
Interest payments on public debt are forecast to rise to 36.6 billion euros next year, or 3.5 percent of GDP, according to the budget's assumption of interest rate costs of 36.5 billion euros, or 3.4 percent of GDP.
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