What is the public debt of a country?

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When the income of a country does not arrive to pay all the necessities of expense and this one requests financing appears the public debt. That it is nothing other than the debts that the whole of a country has – central government, autonomous communities, town halls, councils, Social Security, etc. – with the private sector.

In the case of Spain, this public debt is materialized in the form of Treasury Bills, Bonds and Treasury Obligations. They are fixed income securities issued by the State with a certain maturity and interest. They are bought by large investors, investment funds and even individuals and the State pays an interest in return.


Public debt and a country’s deficit is not the same

Public debt and a country

The difference between income and public expenditures, during the budget year, is what we know as the budget balance. When it is negative, we talk about deficit and financing is required; when positive, surplus. And we always do it in a certain period of time. Debt, meanwhile, reflects the accumulated deficits.


Spanish public debt

Spanish public debt

In the third quarter of 2018, Spain’s public debt amounted to 1.17 billion euros, which translates into 98.30 percent of the Gross Domestic Product (GDP) according to the latest data published by Eurostat. Of course, in 2015 this public debt in Spain exceeded 100% of GDP. Today, in the rest of the countries of the European Union the figure varies a lot but, the average of the 28 amounts to 80.8% of European GDP.


Consequences and international forecasts

Consequences and international forecasts

Public debt implies vulnerability to our economy. Despite the negativity of many in the coming years, the International Monetary Fund made public, in October 2018, a much more positive forecast.

According to the IMF publication, the concern for the sustainability of public finances decreases since the difference between the economic growth rate and the real interest rate will be smaller in all the member countries of the euro zone, including Spain.

The situation in Spain is similar to that in other European countries, with Italy in the lead in public debt (131.8% of GDP), followed by France (97% GDP), Germany (64.1% GDP) and the Kingdom United (87.7% GDP). A complicated picture that the central government is aware of and that will result in a tightening of financial conditions.

From the Independent Authority of Fiscal Responsibility, AIReF, they point out that, assuming the cost of updating the pensions to the CPI, the public debt could be established around 76% in the year 2027.