- AIReF publishes a new edition of the Debt Monitor, which describes its recent evolution, updates medium-term projections and analyses the implications of the proposal to write off the debt of the Autonomous Regions (ARs) under the general regime and the reform of extraordinary financing mechanisms
- In the second quarter of 2025, public debt stood at 103.4% of GDP, showing an improvement in public sector financing conditions
- In the medium term, AIReF projects a 6.4-point reduction in public debt by 2030, which would bring it to around 95.2% of GDP, underpinned by stable nominal growth and a positive primary balance
- The section on regional debt presents medium-term projections and an analysis of the impact of the regional debt write-off considered in the draft bill, pending approval, as well as an evaluation of the role of extraordinary financing mechanisms and their future evolution
- According to estimates, the regional debt ratio would be reduced by 3.9 points of GDP by 2030, driven by a primary surplus of 0.4% of GDP and the contribution of nominal growth, which would contribute 4.6 points to the reduction
- The debt write-off would lead to an additional reduction of 5.1 points of GDP and bring forward by 12 years, to 2029, compliance with the legal limit of 13% of GDP, initially planned for 2041
- In per capita terms, AIReF estimates that the write-off is equivalent to €1,688 per inhabitant, albeit with significant differences across regions
- AIReF warns that, despite the write-off, some ARs will continue to maintain debt levels above 20% of GDP, with dynamics that do not point to a sustained reduction in the medium term
- It estimates that the write-off will reduce interest spending by €2.53bn in the first year, accumulating savings of €15.66bn by 2030, and represents a significant improvement in the financial sustainability of the regional sub-sector
- These savings do not generate room for new expenditure, as interest is excluded from the expenditure rule
- AIReF points out that the measure must be accompanied by fiscal conditionality linked to compliance with fiscal rules and be part of a comprehensive reform of the regional financing system and the national fiscal framework that reinforces co-responsibility and long-term sustainability
- The Debt Monitor includes individualised files for each AR, which contain information on indebtedness, extraordinary financing mechanisms and the estimated impact of the write-off, thus offering a comparative and detailed view of the effect of the measure in each region
The Independent Authority for Fiscal Responsibility (AIReF) has published a new edition of the Public Debt Monitor, which analyses the recent evolution of public debt and includes an analysis of the impact of the partial write-off of regional debt provided for in the Draft Organic Bill on Exceptional Financial Sustainability Measures. According to the simulations performed, the assumption by the State of €83.25bn would reduce the overall debt of the sub-sector by 5.1 points of GDP and bring forward compliance with the legal limit on regional debt of 13% of GDP, initially planned for 2041, by 12 years, to 2029. In addition, it would reduce interest spending by €2.53bn in the first year and by a cumulative €15.66bn by 2030.
Each quarter, AIReF publishes the Public Debt Monitor in which, in addition to analysing the recent evolution of public debt and financial markets, focuses on an aspect of particular importance. After analysing the entry into force of the new fiscal framework and the Medium-Term Fiscal-Structural Plan in the first months of 2025, the focus in June was on the financial situation of the ARs. On this occasion, the analysis of the ARs is more in-depth, given the steps taken in July and September to address extraordinary financing mechanisms for the ARs.
The partial write-off of regional debt would reduce the overall debt ratio of the sub-sector by 5.1 points of GDP, with the largest relative reductions in Andalusia (8.6 points), Castile-La Mancha (8.5 points), Murcia (7.7 points) and Valencia (7.4 points), all of which are above the average. However, some regions will continue to record high levels of debt, exceeding 20% of their GDP.
In per capita terms, AIReF estimates that the debt write-off is equivalent to €1,688 per inhabitant for the country as a whole, although there are significant regional differences. The highest figures are recorded in Castile-La Mancha, Andalusia, Catalonia, Murcia and Valencia, all of which exceed €2,000 per inhabitant. Extremadura, Aragon, Castile and Leon, Asturias, Galicia and the Canary Islands hover around the national average, while the Balearic Islands, Rioja, Cantabria and Madrid have lower amounts, ranging between €1,200 and €1,400. In terms of adjusted population, the pattern is virtually unchanged, with an average write-off of €1,892 per adjusted inhabitant, reflecting the persistence of structural differences in regional debt.
No margin for other expenditure
AIReF highlights that the debt write-off improves financial sustainability and strengthens market access, but warns that it does not generate any room for increasing current expenditure, given that interest payments are excluded from the expenditure rule. Allocating the savings to expenditure rather than reducing debt, without any adjustment by the Central Government (CG), could deteriorate the fiscal position of the GG.
The report notes that the measure must be accompanied by conditionality linked to compliance with fiscal rules to avoid the risk of inappropriate fiscal incentives. Furthermore, it should be part of a comprehensive reform of the regional financing system that reinforces co-responsibility and fiscal discipline. A structural review would help to avoid the risk of inappropriate incentives and ensure greater regional equity and long-term sustainability.
Evolution of public debt and financial conditions
The Monitor shows that public debt reached €1.69 trillion in June 2025, equivalent to 103.4% of GDP, 1.8 points less than a year earlier. The reduction is explained by nominal GDP growth, which is advancing at a faster pace than debt, and by improved financing conditions in the markets.
The European Central Bank’s monetary policy easing, driven by inflation moderation in the euro area to levels close to 2%, has led to a decline in yields at the short end of the curve. In Spain, the yield on one-year debt fell by 51 basis points on the previous year.
The average cost of new Treasury issues stood at 2.5% in September 2025, 90 basis points lower than in 2023, marking the continuation of a downward trend that began the previous year. However, current rates remain above the average cost of the outstanding portfolio, so the average cost of debt is expected to continue rising gradually in the coming quarters.
Upward revision of sovereign rating
The leading credit rating agencies — Fitch, Moody’s and S&P — have recently upgraded Spain’s sovereign rating to A, A3 and A+, all with a stable outlook. The upgrades highlight robust economic growth, above the euro area average, the resilience of the labour market and the moderation of the public deficit. However, they warn that debt reduction remains slower than in other peer countries.
The upgrading of sovereign ratings is consistent with the downward trend of the risk premium, which has fallen in recent months to levels similar to those historically associated with high degrees of solvency.
Medium-term projections
In its baseline scenario, AIReF projects a 6.4-point reduction in the debt-to-GDP ratio between 2024 and 2030, to around 95.2%, driven by stable nominal growth (3.5%), an average surplus of 0.5% and interest payments of around 2.7% of GDP.
The favourable difference between growth and interest rates will allow the debt to maintain a downward path in the medium term. Compared with the previous forecast, the 2029 ratio is revised downward by 3.2 points, due to higher nominal growth, a more favourable primary balance and an improvement in the evolution of interest rates.
At the regional level, AIReF projects an additional reduction of 4.2 points of GDP by 2030, under a no-policy-change scenario, with a gradual improvement in the primary balance and the maintenance of a favourable differential between nominal growth and interest rates. In the longer term, with a constant primary surplus of 0.4% of GDP, regional debt would continue to decline gradually, thanks to a virtually zero differential between interest rates and nominal growth.
Individual files by autonomous region
The Monitor also includes individual files for each autonomous region, which include detailed information on the evolution of their debt, their participation in extraordinary financing mechanisms and the estimated impact of debt write-off in terms of interest savings and debt reduction. These files enable the analysis of regional differences and contextualise the aggregate results of the regional sub-sector.
