Spain Debt

The Spanish debt problems are a secret nobody wants to talk about in Europe. Spain debt is actually not insanely high, but there are other economic problems that scare people.

Spanish Debt Issues

Spain has long been known as a sleeping giant in the European Union. It is an odd country where cultural norms tend to take away from what could be a might economic power in the region. Instead, there is a certain relaxed way of living life with siestas and what have you happening daily. Personally, I’ve loved it every time I’ve been there, but that is just me.

Economically, the Spain debt level is only about 65 percent of gross domestic product. This is actually a fabulous number as anything under 60 percent is generally thought to be a good sign. Danger percentages are usually considered to be 90 percent or more and, for instance, the United States has much higher levels than Spain.

What Is The Big Deal?

The Spanish debt problem has largely been dealt with by the government taking some unique and controversial austerity moves. They’ve worked, but now there are two other major problems. The first is the banking system which owns a lot of debt in the other countries in the EU that are at risk. The amount of debt that Spanish banks own for Portugal alone is the equivalent of 7 percent of the entire Spanish economy. All indications are Portugal will default on that debt. Throw in worries about Greece and Italy, and you have a Spain debt problem that could quickly come to fruition.

The second problem in Spain is unemployment. The levels move above and below the 20 percent level. This means the government must step up and pay out massive social benefits or let its people starve. This drives the Spanish debt levels up, while also decreasing revenues since unemployed individuals pay much less income tax.

Ironically, Spain deserves some credit for its unemployment situation. How so? Well, Spain tells the truth with its numbers. In the United States, the 9.2 percent unemployment figure is an utter joke since it doesn’t count about half the people who are unemployed or have taken part time jobs to make ends meet. The real figure in the United States is believed to be between 16 and 20 percent, a number similar to Spain.

Spain Debt

Is the Spain debt going to sink the country? No, not on its own. If the Spanish banking system falls apart, however, things could get ugly quickly. Throw in an ugly unemployment situation and the prospects for Spanish debt becoming a problem are fairly serious.

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