Spain's public debt soars to record high

Spain's public debt soared to a record high at the end of 2011, Bank of Spain figures showed Friday, as Madrid struggled to slash costs and escape the eurozone debt crisis. Public debt amounted to 734.96 billion euros ($960 billion), equal to 68.5 percent of annual economic output at the end of 2011 -- up from 66 percent three months earlier and 61.2 percent at the end of 2010. The accumulated debts breached the European-Union agreed limit of 60 percent of gross domestic product (GDP) but was still below the eurozone average, which approached 90 percent in the third quarter last year. It was the highest public debt ratio recorded in Spain since statistics in the current format were first published in 1995. Spain's public debt is rising fast because of runaway annual public deficits that have shot past EU-agreed targets, in part owing to high spending by regional governments. The previous Socialist government, ousted by the conservative Popular Party in November elections, had forecast a debt of 67.2 of GDP for the end of 2011, aiming to curb it to less than 70 percent in 2014. But the European statistics unit Eurostat was not so optimistic. It forecast a public debt of 69.6 percent in 2011, 73.8 percent in 2012 and 78 percent in 2013. Spain's conservative government, which took power in December, has yet to announce a new public debt target. The public debt ratio has grown without interruption since the first quarter of 2008 when, after nearly a decade of fast growth and budget surpluses, which trimmed the debt, it amounted to 35.8 percent of GDP. The situation in the 17 regions is particularly worrying: at the end of 2011 their accumulated debt rose to 140.1 billion euros, or a record 13.1 percent of national GDP, from 11.4 percent a year earlier. Municipal debts, however, eased over the year to 35.4 billion euros or 3.3 percent of GDP. Regional governments enjoy a high level of autonomy, prompting concerns in financial markets that their spending could compromise the central government's deficit-cutting goals. Spain had agreed to cut its annual public deficit to 6.0 percent of GDP in 2011 but it overran that target by a wide margin and ended up reporting a deficit of 8.51 percent of GDP. After winning a slight relaxation from Brussels in its goals for this year, Spain is now aiming for an annual deficit of 5.3 percent in 2012 and 3.0 percent in 2013. But the regions are not entirely to blame. The central government's finances also deteriorated in 2011, as its public debt rose to 52.1 percent of GDP at the end of the year from 46.4 percent a year earlier.