- Spain remains among the EU economies with a debt ratio above 100% of GDP, although it has reduced indebtedness by 22.6 points from the post-pandemic peak
- The rebound in inflation and the tightening of monetary policy have raised borrowing costs and will progressively increase interest expenditure
- AIReF forecasts that public debt will fall to 99.9% of GDP in 2026 and continue to decline gradually over the medium term, before resuming an upward path due to the impact of ageing, increased interest expenditure and lower potential growth
- In the framework of the European Semester, the escape clause has been extended not only to defence expenditure, but also to certain energy investments
- The European Commission highlights that Spain complies with the net expenditure path in 2025, although it identifies the risk of deviation in 2026 and underlines the difficult balance faced by public finances between responding to growing expenditure needs and preserving budgetary stability and fiscal sustainability
- Gross financing needs would remain contained in the first part of the projection horizon, around 17% of GDP, but would increase progressively as debt resumes an upward trajectory, reaching 21% of GDP in 2040 and 26% in 2050
- In a scenario of strict compliance with the targets committed in the Medium-Term Structural Fiscal Plan, the debt would be on a favourable path, which would cause the additional adjustment effort in the following plans to be limited to two-hundredths of GDP per year
- Regional debt maintains a downward trajectory and AIReF projects that it will fall to 12.5% of GDP in 2040, although significant differences persist between Autonomous Regions
The Independent Authority for Fiscal Responsibility (AIReF) today published a new edition of its Debt Monitor, in which it analyses the recent evolution of Spanish public debt, the macroeconomic and financial context, the monitoring of the new European fiscal framework by the Commission and the prospects of national and regional public debt in the medium and long term.
AIReF points out that Spanish public debt stood at 101.6% of GDP in the first quarter of 2026, which represents a reduction of 1.7 percentage points compared to the same period of the previous year. From the peak reached in the first quarter of 2021, the ratio has fallen by a cumulative 22.6 points, although it remains four points above the pre-pandemic level. In nominal terms, the volume of debt reached EUR 1.736 trillion in April 2026.
Recent debt developments
AIReF notes that Spain remains among the group of European Union countries with debt levels above 100% of GDP. The reduction recorded since the pandemic is mainly due to nominal GDP growth, which has offset the impact of a primary deficit that has gradually moderated and a rising interest burden.
Compared with other highly indebted European economies, Spain has significantly reduced its debt ratio, although by less than Greece and Portugal, where economic growth has been accompanied by stronger fiscal consolidation.
AIReF also notes that debt developments have been more favourable than projected in the MTP, thanks to stronger economic growth and a lower interest burden than forecast, although the primary deficit and the stock-flow adjustment were higher than initially expected.
Inflation, monetary policy and financing conditions
The Monitor also analyses the shift in the macroeconomic and financial context in recent months. The rebound in inflation since February 2026, against a backdrop marked by the conflict in Iran and disruptions in the Strait of Hormuz, has led the European Central Bank to halt the monetary easing process that began in 2024 and raise its official interest rates in June.
This shift has fed through to financial markets. Sovereign debt yields have risen at both the short and long end in the main European economies, reflecting both the deterioration in the inflation outlook and higher financing needs linked to expenditure on defence, competitiveness, the energy transition and ageing.
In Spain, the impact on the average cost of debt remains gradual thanks to the long average maturity of the portfolio. However, AIReF expects interest expenditure to reach 2.5% of GDP in 2026 and 2027, while the European Commission estimates that the euro area as a whole will increase this expenditure to 2.2% of GDP in 2027.
Monitoring of the European fiscal framework
The Monitor also includes an analysis of the monitoring of the Medium-Term Fiscal-Structural Plan (MTP) and the 2026 European Semester Spring Package. In this context, AIReF notes that debt developments will depend largely on compliance with the commitments set out in the Plan up to 2028, which will shape the adjustment needs in the next fiscal period.
The European Commission considers that Spain has broadly met the reform and investment commitments associated with extending the adjustment period to seven years. However, its assessment indicates that Spain could move from complying with the net expenditure path in 2025 to being at risk of non-compliance in 2026.
The Commission forecasts a smaller deviation in net expenditure than AIReF estimates. Although both institutions agree that net expenditure would exceed the maximum recommended rate in 2026, the cumulative deviation would remain within the permitted limits after applying the flexibility associated with the increase in defence expenditure: 0.4% of GDP according to the Commission and 0.6% according to AIReF.
AIReF recalls that the national escape clause linked to defence expenditure provides temporary and limited leeway, but does not remove the obligation to comply with the net expenditure path or preserve debt sustainability over the medium term. In this regard, the Monitor also reflects the European Fiscal Board’s warning about the risks of extending the escape clause to measures to strengthen energy security, in a context of limited room for expansionary fiscal policy and inflationary pressures, as this could weaken the credibility of the new fiscal framework.
Debt outlook
AIReF forecasts that the public debt-to-GDP ratio will fall to 99.9% of GDP in 2026, 0.8 points below the level recorded in 2025. Over the medium term, debt would continue to decline gradually, although at a more moderate pace as the contribution from economic growth decreases.
However, the Monitor notes that this trend would reverse from the middle of the next decade. Population ageing, higher interest expenditure and lower potential growth would push public debt back onto an upward path.
AIReF’s sensitivity analysis shows that relatively small changes in economic growth, interest rates or the primary balance can significantly alter the future path of debt. By 2050, these differences could place the ratio within a range of 26 points of GDP, between 111% and 137% of GDP.
Gross financing needs would also remain contained in the first part of the projection horizon, but would increase gradually as debt returns to an upward path.
Debt scenarios and fiscal adjustment needs
AIReF notes that debt developments over the coming years will depend decisively on the degree of compliance with the Medium-Term Fiscal-Structural Plan (MTP) up to 2028, as this will shape the adjustment needs under the next fiscal plan (2029-2032). Under a scenario of strict compliance with the targets committed to, debt dynamics would be more favourable and the additional effort required would be virtually zero, limited to 0.02 points of GDP per year.
By contrast, if the scope for deviation allowed after applying the national escape clause for defence expenditure were fully used, the required adjustment would rise to 0.36 points of GDP per year, implying a cumulative effort of 1.44 points of GDP over the 2029-2032 period. Under a no-policy-change scenario, with no new measures, the adjustment would amount to 0.59 points per year, equivalent to 2.36 points of GDP over the period as a whole.
In all the scenarios analysed, the adjustment would aim to raise the primary surplus to 2.8% of GDP, consistent with a balanced budget position and a sustainable debt path over the medium term.
Autonomous Region debt
AIReF also analyses developments in the debt of the Autonomous Regions, whose ratio stood at 20.3% of GDP in the first quarter of 2026. Since the peak reached during the pandemic, debt in the subsector has fallen by 6.7 percentage points, although it remains clearly above the 13% of GDP reference level laid down in the stability regulations.
The Monitor shows that the debt correction has been broad-based, although highly uneven across territories. Twelve of the seventeen Autonomous Regions remain above the reference threshold, and gaps of more than 30 points of GDP persist between the region with the highest level of debt and the one with the lowest debt ratio.
AIReF also notes that extraordinary financing mechanisms still account for close to 60% of total regional debt, although their use remains highly uneven across regions.
AIReF’s projections point to a gradual reduction in regional debt under a no-policy-change scenario, to 12.5% of GDP in 2040. However, the pace of adjustment will remain uneven: while some regions would reach the reference level before the end of the next decade, others would not do so before 2050.
