Spain’s public debt rose to 72.1 per cent of gross domestic product (GDP) in the first quarter of 2012 from 63.6 per cent in the same period a year earlier, the Bank of Spain said Friday.
The government expects the public debt to reach 79.8 per cent of GDP by the end of the year, a figure that does not include the impact of a eurozone loan of up to EUR100 billion (US$126 billion) to ailing Spanish banks.
The ratings agency Moody’s warned Wednesday that the loan “will materially worsen the government’s debt position” and projected Spain’s public deficit would hit 90 per cent of GDP this year and continue rising through 2015.
Moody’s slashed Spain’s credit rating by three notches, from A3 to Baa3, the lowest level of “investment grade” or just above “speculative” or “junk” status.
Spain’s public debt level stood at 68.5 per cent of GDP at the end of last year.
It remains low when compared with other eurozone nations but has risen rapidly since the collapse of a property bubble in 2008 sent the eurozone’s fourth largest economy into a tailspin, causing tax revenues to drop and spending on unemployment benefits to soar.
The public deficit has risen each quarter since the first three months of 2008 when it stood at 35.8 per cent of GDP.
Spain entered its second recession in three years during the first quarter and is struggling with a record jobless rate of 24.4 per cent, the highest level in Europe.