MADRID – Each country has been affected differently by the pandemic, resulting in an economy affected to a greater or lesser extent. The means and measures to combat the pandemic have also not been homogeneous. This fact is clearly reflected in the variations that the levels of government debt of the different countries show between 2020 and 2021.
Within Europe, Spain’s debt level has increased most as a result of the response to Covid-19. Specifically, government debt grew by 26.2% between the first quarter of 2020 and the first three months of 2021. The debt already stands at 125.2% of GDP, according to calculations by Eurostat.
In only two countries, government debt grew more than that of Spain last year. These were Cyprus (+29.5%) and Greece (+28.6%). Therefore, much-appreciated government measures to deal with the pandemic effects initially gave a strong boost to the rise in debt. Below, for example, the ERTE schemes or the exceptional support for the self-employed due to cessation of their activity.
After Spain, Italy (+22.1%) and Portugal (+18%), while the smallest increases were observed in Ireland (+1.7%), Sweden (+4.5%), Bulgaria (+5%) , the Netherlands (+5.6%), Finland (+5.9%) and Luxembourg (+6%).
Spain in top five
At the end of the first quarter of 2021, the relationship between government debt and GDP in the Eurozone crossed 100% for the first time. The ratio was 100.5% compared to 97.8% at the end of the fourth quarter of 2020. In the EU, the share rose from 90.5% to 92.9%. Compared to the first quarter of 2020, the government debt-to-GDP ratio has increased both in the euro area (from 86.1% to 100.5%) and in the EU (from 79.2% to 92.9%).
The highest share of government debt to GDP was recorded in Greece (209.3%), Italy (160.0%), Portugal (137.2%), Cyprus (125.7%), Spain (125, 2%), Belgium (118.6%), and France (118.0%) and the lowest in Estonia (18.5%), Bulgaria (25.1%) and Luxembourg (28.1%).
Pensions care post
The expected money from the European recovery funds will come to Spain on the condition that the government implements the reform plan promised to Brussels. Below is a major reform of the pension system. According to economists, the economic effect of this is one element that could trigger another debt jump for Spain.
The increase in government spending, according to AIReF, would lead to a debt volume that is lethal to the economy, about 165% of GDP. If no corrective element is introduced for expenditure related to demographic evolution, according to El Economista, government debt could rise to 175% of GDP as a result of the reforms.