- Public debt stood at 103.5% of GDP in the first quarter of 2025, representing a reduction of 2.8 points compared with the same quarter last year, although Spain remains one of the countries with the highest levels of debt in the EMU
- AIReF reviews the situation of the debt markets and includes its latest forecasts, which only project a slight reduction in the ratio in 2025 to 101.6% of GDP due to weaker economic growth
- In the medium term, AIReF estimates a reduction to 99.1% of GDP by 2029, while in the long term, it projects an unfavourable evolution to 181% by 2070 in its baseline scenario
- According to AIReF projections, an adjustment of 3.16 points of GDP would be necessary between 2025 and 2040, spread over four four-year fiscal plans to ensure a downward trend in long-term debt
- The adjustment, applied progressively and on a decreasing basis, would reduce the debt ratio to 62% of GDP by 2050, bringing it closer to the 60% threshold contained in the Maastricht Treaty
- AIReF analyses regional debt, which stood at 21.1% of GDP in 2024, with 13 Autonomous Regions (ARs) above the legal reference rate of 13%. Valencia, Murcia, Catalonia and Castile-La Mancha are the most indebted regions in relation to their GDP
- AIReF estimates that, in a no-policy change scenario, the regional debt ratio will gradually decline in the medium term but will remain above 18% in 2029. In the longer term, it will continue to decline, reaching 13% of GDP by 2044
The Independent Authority for Fiscal Responsibility (AIReF) published the new edition of the Debt Monitor on its website today, which analyses the recent evolution of public debt, which stood at 103.5% of GDP in the first quarter of 2025. Despite falling in recent years, Spain remains one of the EMU countries with the highest levels of debt. In the Debt Monitor, AIReF analyses the situation of the financial markets in recent months and includes its latest forecasts, which project a slight reduction in the ratio in 2025 to 101.6% of GDP due to weaker economic growth. In the medium term, AIReF estimates a reduction in debt to 99.1% of GDP by 2029 and, in the long term, in its baseline scenario, it projects debt of 181% of GDP by 2070.
AIReF reviews the financing conditions in debt markets, marked by contained inflation in the euro area and the easing of monetary policy. Inflation is virtually at the European Central Bank’s (ECB) target of 2%, while central banks are moving towards a gradual, data-driven normalisation, with different approaches in the euro area and the United States. In addition, central banks have made progress in reducing their balance sheets, with the aim of normalising monetary conditions after years of expansionary policies.
AIReF notes that, in the year to date, markets have experienced significant volatility due to the Trump Administration’s tariff and fiscal policies, geopolitical tensions, growing spending needs, defence plans and the need to reduce high debt levels and comply with the commitments of the new European fiscal framework. This volatility has impacted both sovereign bonds and exchange rates, pushing yields in the United States to above 5% and causing the dollar to depreciate by around 10% against the euro. In contrast, greater macroeconomic stability in Europe and the ECB’s policy have helped contain yields, reinforcing the attractiveness of European debt.
Against this backdrop, Spanish Treasury bill yields have fallen by almost half due to the ECB’s rate cuts, but they continue to attract small savers. Retail demand remains strong, with reinvestments close to 90% and a still high share of household holdings, at around 30% of the total. In addition, the Treasury has continued to reduce the cost of its new issues in 2025. The average cost has fallen to 2.79%, 120 basis points below the peak reached in 2023.
Debt projections
AIReF forecasts a slight reduction in the debt-to GDP ratio in 2025, standing at 101.6%, which represents a fall of only 0.2 points compared with 2024. This moderation in the pace of the reduction reflects weaker economic growth, a greater stock-flow adjustment associated with European loans and a still negative, albeit more contained, impact of the public deficit. These forecasts are consistent with those of the Government.
In the medium term, AIReF estimates a gradual reduction in the public debt, which would reach 99.1% of GDP by 2029, representing a reduction of 2.7 points compared with 2024. However, it points out that this downward trend is showing signs of exhaustion as the decade progresses. In fact, 2030 will mark a turning point in the evolution of debt, with a return to an upward path due to the impact of ageing. In 2050, despite lower demographic pressure, the upward trend will be sustained by increased interest spending. Accordingly, in the long term, AIReF projects an unfavourable evolution of the ratio in its baseline scenario, reaching 181% of GDP by 2070.
AIReF includes in the Debt Monitor, as it did in its last report, a scenario of compliance with the fiscal rules of the new European governance framework, which shows a favourable evolution of public finances in the long term. According to the forecasts included in the Medium-Term Structural-Fiscal Plan (MTP), the public deficit and debt would be reduced in 2041 by 1.2 and 25 percentage points of GDP, respectively, compared with 2024.
Taking into account its baseline projections, AIReF estimates that an adjustment of 3.16 percentage points of GDP would be necessary between 2025 and 2040, spread over four four-year fiscal plans, to ensure a downward trend in debt in the long term. This adjustment, implemented in a progressive and decreasing manner, would reduce the debt ratio to 62% of GDP by 2050. Each plan would ensure that debt continues to decline even in adverse scenarios. The first plan, already committed to for the period 2025-2028, would include an annual adjustment of 0.42 percentage points. Subsequent plans would require less effort, adapting to long-term sustainability needs.
AIReF notes that, while the possible application of the national escape clause would allow the increase in defence expenditure to be absorbed without compromising compliance with the First Fiscal Plan, such an increase would worsen the future fiscal position, as it would translate into higher deficit and debt levels. To maintain a downward path in the long-term debt ratio, it is estimated that an additional fiscal cutback of 0.13 percentage points of GDP would be necessary for every 0.5 percentage point of GDP increase in defence expenditure, to be implemented in the next fiscal plan.
Regional debt
In the Debt Monitor, AIReF analyses the evolution of regional debt and includes individual fact sheets for each AR. Regional debt has followed a sharply upward trajectory since 2007, reaching 21.1% of GDP at year-end 2024. This situation is widespread in most of the ARs, with 13 of the 17 exceeding the legal threshold of 13%, with marked regional differences. Valencia, Murcia, Catalonia and Castile-La Mancha are the most indebted ARs in relation to their GDP, with ratios close to or above 30%. Catalonia heads up the list in absolute terms, while Valencia has the highest per capita debt. In contrast, Navarre, the Canary Islands, the Basque Country and Madrid maintain levels below 13% of GDP.
AIReF also reviews the use of extraordinary financing mechanisms by the ARs, which have remained stable at around 60% since 2017, following a rapid increase between 2012 and 2016. These mechanisms have been used very unevenly across ARs and over time. Currently, six ARs, including Catalonia, Valencia and Castile-La Mancha, have a utilisation rate of over 75%, while others, such as Navarre, the Basque Country and Madrid, do not use them at all. Catalonia, Valencia and Andalusia account for 75% of total funds received
In a no-policy change scenario, AIReF estimates that the regional debt ratio will gradually decline in the medium term, although it will still remain above 18% in 2029. In the longer term, under a baseline scenario, it would continue to decline, reaching 13% by 2044, with a reduction of 6.8 points until 2040, thanks to GDP growth and a favourable evolution of the primary balance. However, if a gradual fiscal cutback of 0.23 points per annum were applied between 2025 and 2028, the ratio could reach 13% as early as 2031.
