Spain’s 2012 public debt to widen

Spain’s 2012 public debt to widen

MADRID - Agence France-Presse
Spain’s 2012 public debt to widen

People enter an unemployment office in Madrid yesterday. The number of people filing for unemployment benefits in Spain rose by nearly 39,000 last month to a little over 4.75 million. March’s increase was the eighth straight monthly increase. AP photo

Spain’s public debt will leap more than 10 percentage points this year to 79.8 percent of gross domestic product (GDP), the finance ministry said yesterday.

“Public debt will rise from 68.5 percent of GDP at the end of 2011 to 79.8 percent, a level which is still below the eurozone average of 90.4 percent,” it said in a statement as Budget Minister Cristobal Montoro presented his government’s 2012 budget to lawmakers.

The European Union has set a ceiling for public debt of 60 percent of GDP.

Spain’s public debt ratio has grown without interruption since the first quarter of 2008 when, after nearly a decade of fast growth and budget surpluses, which trimmed the debt, it amounted to 35.8 percent of GDP.

The public deficit has risen fast because the collapse of a property bubble in 2008 sent the Spanish economy into a downward spiral, causing tax revenues to drop even as spending on jobless benefits and other social spending shot up. The budget -approved by the cabinet on March 20- includes 27 billion euros’ ($36 billion) worth of spending cuts and tax hikes, making it the most stringent since Spain returned to democracy following the death of dictator Francisco Franco in 1975.

“We are convinced that this budget will meet the challenge of recovering the confidence of our European partners,” Montoro told a news conference held in the parliament. Spain had agreed to cut its annual public deficit to 6 percent of GDP in 2011 but it overran that target by a wide margin and ended up reporting a deficit of 8.51 percent of GDP. After winning a relaxation from Brussels in its goals for this year, Spain is aiming for an annual deficit of 5.3 percent in 2012 and an EU-limit of 3 percent in 2013.

Unemployment rising

The number of registered job seekers in Spain rose for the eighth straight month in March to a new record high, government figures showed yesterday, as the country slides back towards recession.

The number of workers officially registered as unemployed climbed by 0.82 percent from the previous month to reach 4.75 million, the highest figure since the current statistical series began in 1996, the labor ministry said.

The Spanish economy, the eurozone’s fourth largest, is still reeling from the collapse of a labor-intensive property bubble in 2008 which destroyed millions of jobs.

Spain’s economy is expected to contract 1.7 percent this year, after posting a modest expansion of 0.7 percent in 2011, according to the government’s estimates.

Figures released in January by the National Statistics Institute, which uses a different calculation method, showed a jobless queue of 5.27 million and an unemployment rate of 22.85 percent at the end of 2011. The government expects the unemployment rate -already the highest in the industrialized world- to surge to 24.3 percent this year.