Spain unconcerned by rising debt levels in markets
News Article Date: Tuesday 27th of October 2009
The Spanish government is unconcerned that rising levels of public debt in global bond markets could crowd out the country's own issuance plans, Minister of Economy Elena Salgado said on Monday.
Salgado said she did not expect demand for Spanish paper to be hit by rising public debt levels from larger economies such as the United States.
'This is not what we are seeing ... Our public debt remains at low levels because we hold the highest credit rating and so I don't think there is a risk,' Salgado said during a conference.
The spread of Spanish 10-year Treasury bonds, known as bonos, over benchmark German bunds is at around 50 basis points, significantly lower than January's spread of around 150 points after credit agency Standard & Poors cut its rating on Spanish debt.
Credit rating agencies Fitch and Moodys have left Spain's public debt rating at the highest level.
The government expects to issue net debt of just above 100 billion euros ($150.4 billion) in 2009 and is aiming for a more modest level of 76 billion euros next year as it struggles to contain a ballooning deficit.
Spain's debt to gross-domestic-product ratio is expected to rise to 62.5 percent in 2010 from 53.4 percent this year, almost double that recorded in 2008 though well below many of its European peers.
The Spanish public deficit as a percentage of GDP has soared to one of the highest in the European Union. It is expected to reach around 10 percent in 2009, from a surplus of more than 2 percent in 2007 due to the economic slowdown and a massive stimulus plan.
Salgado reiterated the government is committed to bringing the deficit down to 3 percent of GDP by 2012, in line with the EU's Growth and Stability Pact, though reiterated this deadline could be extended.
'Twenty of the twenty seven (EU economies) have an excessive deficit and so, what was once the exception has become the rule and this will certainly guide the commission's ruling in the next few months,' Salgado said.
'If it's extended by another year, it would give us a greater margin. But, we will continue to work towards (3 percent by 2012) because we believe we must do what is needed to bring the deficit down as much as possible.'
European Union leaders will this week endorse 2011 as the deadline for members of the 27-country bloc to start sharply cutting ballooning budget deficits.
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