6533b86ffe1ef96bd12cdbec

RESEARCH PRODUCT

Sub-central Governments and Debt Crisis in Spain over the Period 2000–2011

subject

description

This chapter studies the quantitative evolution of sub-central sovereign debt in Spain over the period 2000–2011 and compares it with the evolution of central debt. As an intense process of political and fiscal decentralization has taken place since the mid eighties, the paper examines whether this drive to decentralization has been paralleled by any fiscally undisciplined behavior on the part of Spanish sub-central governments over the period considered. Some key formal legal rules and informal behavioral norms present at sub-central politics in Spain are examined, including legal controls on borrowing by sub-central governments. The empirical analysis will be based on the internationally comparable public finance figures provided by sources such as the OECD, the Eurostat and the Bank of Spain. The paper concludes that economic performance seem to be the key factor for explaining the evolution of sub-central, as well as central, public debt before and after the world financial crash. The analysis shows that in terms of the Spanish GDP the debt burden generated by sub-central governments in Spain decreased over the 2000–2007 period. However, this debt has soared from 8.5 per cent of Spanish GDP in 2007 to 16.4 per cent in 2011, adding 85 thousand millions euros (about 106 billions US dollars) to the stock of total public debt in Spain in just four years. Central government added 267 thousand millions euros (about 334 billions US dollars).