Spain’s economy at Civil War levels with more debt than EVER before

Brexit: British expat discusses difficulty of living in Spain

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Spain’s GDP has fallen by levels not seen since the Spanish Civil War in the late Thirties, sparking fears of a much slower bounce-back from the coronavirus crisis than other EU member states.

The country’s public administrations are more indebted than ever before.

However, the debt-to-GDP ratio, the most reliable indicator to measure a country’s capacity to repay its liabilities, is below the record highs reached in May, when it stood over 125 percent of GDP.

September’s data, published on Wednesday by the Bank of Spain, shows this now sits at 122.1 percent, and the Ministry of Economic Affairs hopes the ratio will continue to fall until the end of the year, the official target being 119.5 percent.

Since September last year, debt has increased by 124,097 million euros (up 9.5 percent).

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Government revenue fell while spending to put in place coronavirus support measures grew.

State debt stood at 1.24trillion euros in September – 15,178 million more than in August (up 1.23 percent).

In year-on-year terms, the central government saw its debt increase by 6.2 percent.

Among all EU members, the economic impact of COVID-19 has been most hardly felt in Spain.

While much of the eurozone is making progress in moving towards pre-pandemic levels of output, there is still a large gap to fill in a country that, in terms of coronavirus cases, boasts promising numbers.

Its slow recovery is not in line with the fact it has some of Europe’s lowest infection rates.

Spain is also one of the main beneficiaries of the EU’s €800billion recovery fund.

It is due to receive 140 billion euros over three years – approximately half in grants and the other half in loans.

However, Pedro Sánchez’s government has been slow to request its use.

Madrid only did so last week, when it officially asked Brussels for the first instalment of €10billion, the Budget Ministry confirmed.

Experts claim the timing may have been a bad decision in the long run.

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Spain received a downpayment of €9billion in August.

It will receive the remaining part by the end of the year, Spanish Economy Minister Nadia Calvino said, as long as it complies with a range of milestones — a total of 52 — mutually set between the Southern European country and the EU Commission.

They include climate change mitigation goals, gender pay equality and digitalisation strategies.

Spain may have become the first member state to ask for its share of the fund. Considering its economic position, though, it still was a late move.

A recent report by AIReF, Spain’s fiscal watchdog, found this will slow the country’s impact on growth.

Energy prices and labour, as highlighted in the European Commission’s autumn forecast, as well as the supply chain crisis and a weak tourism season further add to the nation’s struggles.

Last year’s forecast for economic recovery showed an expansion of 9.8 percent — which includes a 2.6 percent rise from the recovery funds — but this has dropped to 6.5 percent.

Growth is now likely to be even lower, at an estimated 5.5 percent, according to AIRef.

Of the damage made by the pandemic in 2002, less than half would be compensated at this rate.

Additional reporting by Maria Ortega

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