MADRID—Bank of Spain figures show that the country’s public debt is now worth more than the value of the economy.
The bank said May 18 that Spain’s public debt stockpile stood at 1.09 trillion euros ($1.23 trillion) in the first quarter of the year. That represents 101 per cent of the country’s annual GDP—1.08 trillion euros—in 2015.
The government estimates the debt ratio will be 99.1 per cent of GDP at the end of 2016.
Spain’s public debt has risen consistently since the beginning of the country’s economic crisis in 2008.
Spain emerged from a double-dip recession in late 2013, ending a five-year period that saw some 3.5 million jobs lost. It now is one of the European Union’s strongest-growing economies.
The European Union has so far refrained from imposing immediate fines on Spain and others despite their failure to meet budget targets, opting instead to give them additional leeway to get back on track.
The EU’s executive had been expected to impose sanctions on Spain for not meeting EU-prescribed limits for a fourth year running. Action against Portugal had also been expected.
Instead, the European Commission said it “will come back to the situation” in July.
The EU wants countries to keep their budget deficits below three per cent of their annual GDP and has sets targets for those not meeting the limit on how to get there. One of the reasons behind Europe’s sprawling debt crisis of the past few years is that the limits were often ignored.
Though countries can be fined up to 0.2 per cent of their GDP if they fail to implement measures to meet the limits, no country has yet been fined.
The decision to postpone judgment could be convenient for Spain’s caretaker prime minister, Mariano Rajoy, ahead of June 26’s general election. Even after skirting deficit limits for years, Rajoy has said he still plans to implement tax cuts, raising the spectre of more clashes with the EU on deficit reduction.
Deferring any sanctions is set to fuel accusations that the EU Commission has no teeth when it comes to enforcing strict economic rules.
The Commission also gave Italy some leeway after encouraging economic statistics and commitments from Prime Minister Matteo Renzi to bring the budget back in line. It said it will have a new report on Italy by November.
Overall, the average deficit in the eurozone is to fall to 1.9 per cent of GDP, down from 6.1 per cent in 2010 during the height of the economic crisis.