State indebtedness rises 6.9% after implementation of millionaire plan to fight inflation, while Social Security rises another 8%
The two major items costing the most money this year to combat the effects of the crisis emanating from Ukraine and the pension commitments are those that led to another rise in Spain’s public debt to 1.49 million euros until last August, according to data updated by the Bank of Spain. This is a 5.1% growth in one year, after several months with numerous anti-crisis plans put on the table by the state and the need for Social Security to fund their payments.
For in reality, it is the fault of the central administration and that of the body in charge of paying pensions that has risen the most until the summer, compared to the greater stability of the debt burden of autonomous communities and municipalities, which have increased their financial structures affected by last year’s public aid programs.
In the case of the State, its debt burden has risen to 1.31 billion euros, an increase of 6.9%. Since the summer of last year, the government has activated several economic aid and tax relief programs that have had an impact on public finances. The Executive foresees that for this 2022 only, the support plan assumes an expenditure of up to 30,000 million euros for the state, including the bonus of 0.20 euros per liter of fuel; the extension of the minimum vital income; or the reduction of taxes such as VAT on electricity and gas bills, among other things.
For its part, the social security debt already stands at almost 100,000 million euros, an increase of 8% compared to the same month of August last year. In reality, the body’s fault lies with the state itself, which provides loans from the public administration to cover the expenditure it has pledged in the field of pensions.
These social charges do not yet include the planned revaluation of benefits in 2023, with an increase of 8.5%, and that will represent an extraordinary charge of more than 15,000 million euros, to which an additional 5,000 million must be added for the inclusion of new retirees in the system in the coming months, when it matches them.
The government’s calculations assume a government debt-to-GDP (gross domestic product) ratio of 115.2% by the end of this year, compared to 118% in 2021. This decrease, which contrasts with the increase of the government’s indebtedness is due to explaining why the economy will grow more this year, decreasing the relationship between the two variables despite rising debt. For 2023, the Ministry of Economic Affairs expects a government debt ratio of 112.4%.
In fact, Spain will issue more debt in 2023, according to what is extracted from the draft general state budget law for next year. The Spanish Treasury plans to issue a gross debt issuance of 256,930 million euros next year, 8.2% more than in 2022, which will allow it to cover the financing needs of the public authorities and the write-offs. The bulk of the gross issuance will be concentrated in Treasury bills and government bonds and bonds. It also considers that the debt-to-GDP ratio will close at 115.2% in 2022 and be reduced to 112.4% in 2023. In the second quarter of 2022, it stood at 116.8%. With regard to the Treasury’s net issuance, a reduction of EUR 5,000 million to EUR 70,000 million is expected in 2023.
The accumulation of debt is not only a problem for Spain. The eurozone economies as a whole recorded a record government debt of 12.1 trillion euros in the second quarter of 2022, compared to 11.9 trillion in the previous quarter, although the ratio to GDP fell to 94.2%, from 95.2% in the first three months of the year, as reported by the Community Statistical Office, Eurostat.
In this way, the debt volume in the eurozone has increased by more than 2 trillion euros since the fourth quarter of 2019, the last full quarter before the pandemic, when the debt burden was 10 trillion euros, and is practically double the 6.2 trillion euros. debt of the eurozone in the second quarter of 2007, before the outbreak of the financial crisis that triggered the great recession.
Of the twenty-seven, the highest levels of government debt above GDP at the end of the second quarter of 2022 were recorded in Greece (182.1%), Italy (150.2%), Portugal (123.4%), Spain (116 .1% , with data from the second quarter), France (113.1%) and Belgium (108.3%), while the lowest were observed in Estonia (16.7%), Bulgaria (21.3%) and Luxembourg (25.4%).
The general government deficit of the EU as a whole stood at 2.1% of GDP and 1.8% in the second quarter, compared with negative imbalances of 2.5% and 2.3% respectively in the previous quarter, which in both cases represents the smallest deficit since the fourth quarter of 2019, the last full before the pandemic.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
