Spain closed the year of the pandemic with the highest deficit of all the countries of the European Union: 11% of GDP, according to the data that the Government has communicated to Brussels and that the community statistical office Eurostat has confirmed this Thursday. The debt ratio is also one of the highest: last year it amounted to 120% of GDP, the fourth highest rate in the environment, only behind Greece (205.6%), Italy (155.8%) and Portugal (133.6%).
These percentages are a reflection of the great effort that all countries have made to face the crisis caused by the coronavirus last year, which has led to an unprecedented increase in spending to support basic services and a parallel fall in income from the bolt in the activity and the limitation to the movements.
According to Eurostat, public spending in the euro zone reached 54.1% of GDP in 2020 (52.3% in Spain), 7.1 points more than the previous year. In the EU the increase has been similar, of almost seven points, to stand at 53.4% of GDP. In Spain the jump has been even greater: public spending grew by more than 10 points in 2020 compared to the year of 2019.
On the income side, the variation has had a different sign due to the denominator effect of the fall in GDP ―the lower activity, the weight of income grows―: income in the euro zone stood at 46.8% of GDP in 2020, compared to 46.4% the previous year (46.5% in the EU), and in Spain 41.3%, compared to 39.2% in 2019. If this variable is looked at in millions of euros, there has been a decrease both in the EU and in the common currency area.
These gaps between revenues and expenditures raised the public deficit on the continent to levels that were not even reached in the previous financial crisis of 2008. At that time, the average in both the EU and the euro zone was around 6% of GDP. In 2020, the deficit ―the difference between public income and expenditure― of the member countries of the Union touched 7% of GDP, standing at 6.9% (compared to 0.5% the previous year), in the 7.2% (from 0.6% the previous year) in the States of the common currency. Debt also shot up to 98% in the euro area, 14 points more than the previous year, and to 90.7% in the EU.
In both cases, the data registered by Spain are well above the average, a reflection of the fact that the crisis was faced with public accounts that were not yet completely healthy, despite being under the excessive deficit procedure of the company for almost a decade. EU due to bulky red numbers. Estonia (18.2%), Luxembourg (24.9%), Bulgaria (25%), Czech Republic (38.1%) and Sweden (39.9%) had the lowest debt rates; Denmark was the only country with a deficit below the 3% threshold set by the EU – which has suspended fiscal rules due to the severity of the crisis – of 1.1%.
The Ministry of Finance of Spain, which published the budget closing data at the end of March, broke down that revenues fell 5% last year (24,487 million), while spending increased by 53,000 million. Most of the disbursements went to countercyclical measures (almost 45,000 million) to prop up basic services and offer a cushion to workers and companies. To this increase must be added the negative equity of the Sareb, known as the bad bank, some 10,000 million that Eurostat has forced to account for in the financial year 2020. Even eliminating this impact, which in principle will only affect the accounts for 2020, the gap it would have reached 10.09% of GDP, and it would be the highest in the environment only behind Malta (10.1%).
Despite everything, this imbalance is below the official forecasts that the Government had sent to Brussels last year, which placed it at 11.3%. Nor is it the worst record in percentage terms: in 2009, the red numbers reached the 11.3% of GDP that was forecast for this year as well. It does represent a record in absolute terms: more than 123,000 million euros. There is also a record in growth in the debt rate, which in 2020 climbed more than 24 points and reached the highest ratio in a century.
The Government has been forced to review its growth forecasts for this year due to a less vigorous start to the year than expected and the delay in the processes to implement European funds. The Vice President of Economic Affairs, Nadia Calviño, announced on April 9 that the Executive now estimates a rise in GDP of 6.5% for 2021, compared to the 7.2% previously forecast, which would rise to 9.8% by the impact of EU aid. The minister added that for next year the increase will be 7%, and insisted that growth is delayed, but not lost.
What La Moncloa has not yet modified are the deficit and debt forecasts. These indicate that the mismatch between expenses and income falls this year to 95,699 million compared to more than 123,000 million last year, equivalent to 7.7% of GDP. With regard to debt, the Government estimates that there will also be a decrease, among other things because the impact of Sareb will not be repeated. It expects it to close 2021 at 117.1% of GDP.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.