Spain's public debt hits a record: €1.646 trillion and rising

Public debt sets another record: €1.646 trillion

How much does Spain owe? According to the Banco de España, €1.646 trillion at the end of February. The figure, published by the supervisor, is 2.6% higher than the same month a year earlier: an additional €42.051 billion in twelve months. And in the last month alone the volume grew by €16.906 billion, or 1.04%. The data comes with GDP as its alibi: the latest available ratio, from December, puts debt at 101.8% of gross domestic product (GDP), below the 102.5% the Government had committed to for the end of the year.

The official reading is that borrowing is being contained. The reading that imposes itself as soon as one looks at the historical series is another: every month that passes, the absolute figure is the highest ever recorded, because public debt does not fall, it is merely compared with a GDP that grows.

How much does Spain really owe if the autonomous communities are included?

The Banco de España figure falls short for anyone adding up the entire public sector. According to a calculation circulating in the debate, to the state figure one would have to add the debt of the autonomous communities, around €500 billion, with the total then exceeding €2.1 trillion. Some go further and argue that official accounting hides items — pension commitments, guarantees, instrumental entities — that would push the total to €2 trillion or more.

This is the first sustancia ilegal in the official narrative: in that reading, the published debt is not the total debt. What appears in the statistical bulletin is a partial snapshot that has become, for convenience, the official snapshot.

Why debt rises even when the ratio falls

Here is the trick that irritates most. The star indicator is not the volume, but its relationship to GDP. If the economy grows more than debt, the percentage falls and the headline is good. If GDP rises largely thanks to public spending financed by debt itself, as several participants argue, the exercise becomes a dog chasing its tail. The growth that dresses up the ratio would be, in part, the very borrowing that inflates it.

And GDP does not always grow. A tourism crisis, a European slowdown or any black swan is enough for the denominator to contract and the percentage to go through the roof without anyone having borrowed a single extra euro.

Money is born as debt: the argument running through the whole discussion

There is a strand of analysis that does not stop at accounting detail. It argues that in a fiat-money monetary system, practically the entire money supply is created as credit, so debt is not an anomaly: it is the mechanism. Under that logic, the question is not how it is paid, but who collects the interest and how much room is left for the debtor.

The other camp replies with technical coldness: as long as the market keeps buying bonds and the central bank supports the market, the problem is one of confidence, not solvency. It rests on a figure circulating about the European financial system: three out of every four euros of credit go to refinancing existing debt, not to financing new activity. The music does not stop because nobody wants it to.

Pensions and interest rates: the bill that has not arrived yet

The scenario that generates most consensus among sceptics is not a sudden bankruptcy, but a slow suffocation. Debt is refinanced at rates that are not those of the past decade. When the peak in pension spending coincides with a cycle of high rates, debt servicing will eat a chunk of the budget now being debated in subsidies.

Those who raise that scenario warn of an inevitable axe blow, and not necessarily orchestrated from the BOE (Spain's official state gazette).

Comparing with France or the United States fixes nothing

The most repeated defence is the international comparison: if the United States is above 120% of GDP and France is also climbing, Spain is not doing so badly. The argument has a symmetry problem, according to some participants: those that borrow in their own currency and with their own central bank have tools that do not exist here. And the fact that others are running faster towards the precipice does not shorten ours.

Spanish public debt has been setting records month after month, and the headline that the ratio is improving only works as long as nobody looks at the numerator. Printing press, kick the can down the road, and wait for the next government to be the one that presses the button.