{"id":50981,"date":"2024-07-05T17:00:00","date_gmt":"2024-07-05T15:00:00","guid":{"rendered":"https:\/\/www.11onze.cat\/?p=50981"},"modified":"2024-07-06T19:56:56","modified_gmt":"2024-07-06T17:56:56","slug":"eurozone-spiralling-public-debt","status":"publish","type":"post","link":"https:\/\/www.11onze.cat\/en\/magazine\/eurozone-spiralling-public-debt\/","title":{"rendered":"The eurozone&#8217;s spiralling public debt"},"content":{"rendered":"<div class=\"component text\">\n  <div class=\"container\">\n\n\n    <div class=\"row\">\n      <div class=\"col  col-lg-8  offset-lg-2\">\n        <h3><b>The eurozone&#8217;s accumulated public debt, first as a result of the banking sector bailout and later as a consequence of stimulating economies hit by the pandemic, remains at an unsustainable level. Spain remains among the most indebted countries in Europe, with a debt-to-GDP ratio that rose by 1.2 points year-on-year in the first quarter of the year.<\/b><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Public debt is<\/span><b> the volume of money that a state has borrowed directly or through the financial markets<\/b><span style=\"font-weight: 400;\"> or, in other words, all unsettled payment obligations. It is a government&#8217;s tool for deferring its expenditures over time to fulfil the functions it has committed itself to.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By itself, sovereign debt is not necessarily a bad thing; <\/span><b>it can serve as a lubricant to stimulate a stagnant or recessionary economy<\/b><span style=\"font-weight: 400;\">. It is often used in the first instance to slow down a slowdown in exceptional situations through aid and fiscal stimulus to prevent the destruction of the productive fabric.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is what happened during the pandemic when governments around the world were forced to inject large amounts of money into their economies, <\/span><b>exponentially increasing their sovereign debt to avoid a total collapse of the means of production<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a general rule, however,<\/span><b> this investment has to be accompanied by structural reforms that seek to improve the efficiency and competitiveness of the economy<\/b><span style=\"font-weight: 400;\">. Otherwise, public deficits can get out of control, perpetuating a sovereign debt that may end up being unsustainable.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That said, borrowing to make an investment that will generate value for the economy is not the same as borrowing to cover uncontrolled spending. It should also be borne in mind that <\/span><b>some countries can afford high levels of debt because the financial markets have confidence in their ability to pay<\/b><span style=\"font-weight: 400;\">, thanks to the stability of their economies or their national currency.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>The debt-to-GDP ratio<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Although other variables are taken into account, <\/span><b>the ratio of public debt to GDP is a key metric in the analysis of a country&#8217;s debt sustainability<\/b><span style=\"font-weight: 400;\">. In this respect, the eurozone countries barely cleaned up their public accounts in 2023.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to an analysis by the Bank of Spain that consolidates the transactions between the different layers of the public sector, <\/span><b>the Spanish state has gone from having a public debt of 384,662 million euros in 2007 to more than 1,668,440 million this year<\/b><span style=\"font-weight: 400;\">. This is a figure equivalent to 114.1% of GDP, which is almost 7 points higher than the official figure given by the government (107.7% of GDP, an increase of 1.2 points over the previous year) and far exceeds the EU average for the same indicator (95.9% of GDP).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Countries such as Greece, Italy and France are in a worse situation, partly thanks to the good performance of <\/span><b>the Spanish economy, which grew by 2.5% in 2023 and far outperformed the euro area average.<\/b><span style=\"font-weight: 400;\"> This contributed to the fact that the public debt-to-GDP ratio fell by 3.9 percentage points over 2023.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>Fiscal imbalances are too high<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In its latest <\/span><a href=\"https:\/\/commission.europa.eu\/document\/download\/2db632f9-c8a5-47ea-a2fa-e642e6e6af90_en?filename=2024_06_20_EFB_assessment_of_euro_area_fiscal_stance_in_2025.pdf\"><span style=\"font-weight: 400;\">report<\/span><\/a><span style=\"font-weight: 400;\"> released last Wednesday, the European Fiscal Council equivalent to the Independent Authority for Fiscal Responsibility (AIReF) warns that in recent years,<\/span><b> public spending has accelerated significantly in many eurozone countries, well beyond the temporary measures taken in response to the Covid-19 crisis<\/b><span style=\"font-weight: 400;\"> and the subsequent rise in energy prices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this regard, <\/span><b>it expects fiscal deficits in 2024 to turn out higher than previously projected and recommended<\/b><span style=\"font-weight: 400;\">. It adds that it is likely that the euro area will have to enter 2025 with a higher level of budgetary support than previously forecast.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, the organisation warns that <\/span><b>Spain remains among the most indebted countries in Europe <\/b><span style=\"font-weight: 400;\">and that its debt has increased the most as a result of the sanitary crisis. Therefore, it will have to make adjustments of 7,000 million per year from 2025 and calls on the Spanish government to make an &#8220;extra effort&#8221; to adjust before reaching this scenario.<\/span><\/p>\n<p><b>If you want to discover the best option to protect your savings, enter <\/b><a href=\"https:\/\/serveis.11onze.cat\/en\/preciosos-11onze\"><b>Preciosos 11Onze<\/b><\/a><b>. We will help you buy at the best price the safe-haven asset par excellence: physical gold.<\/b><\/p>\n\n      <\/div>\n    <\/div>\n  <\/div>\n<\/div>\n\n\n<div class=\"component cards\">\n  <div class=\"container\">\n    <div class=\"row\">\n      <div class=\"col col-xl-8 offset-xl-2\">\n        <h1>If you liked this news, we recommend:<\/h1>\n        <div class=\"cards__wrapper\">\n          <div class=\"card\">\n            <a href=\"https:\/\/www.11onze.cat\/en\/magazine\/global-public-debt-approaches-100-of-gdp\/\" class=\"card-link\" target=\"_self\"><\/a>\n            <div class=\"card-img\">\n              <img decoding=\"async\" src=\"https:\/\/www.11onze.cat\/wp-content\/uploads\/2023\/10\/HERO_IMAGE_DEUTE-768x256.png\" class=\"card-img-top\" alt=\"\">\n                <span class=\"card-category\">Economy<\/span>\n            <\/div>\n            <div class=\"card-body\">\n              <p class=\"card-title p2\"><strong>Global public debt approaches 100% of 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