OECD Warns: Spain Leads the EU in Public Debt Growth Amid Rising NATO Pressure

 

OECD Warning: Spain Leads the EU in Public Debt Growth

Unprecedented Rise in Spain’s Public Debt

Spain has seen a significant increase in its public debt, making it the fastest-growing debt burden in the European Union. According to data from the Bank of Spain, the country’s public debt reached €1.624 trillion in June 2024, equivalent to 108.2% of GDP. This surge reflects the ongoing impact of the COVID-19 pandemic, inflation, and energy subsidies following Russia’s invasion of Ukraine.

Reports indicate that this record-breaking increase is a direct result of the government’s expanded public spending to tackle successive economic and social crises. Emergency financial support for households and businesses, along with measures to stabilize the economy during global uncertainty, have significantly contributed to this rise.

The growing debt also places a heavier burden on the national budget, with rising interest payments limiting public spending on essential services. This presents a new challenge for the government: reducing the fiscal deficit without compromising social programs.

Also read: How does public debt affect Spain’s economy?

OECD's Warning on Spain's Rising Debt

In its latest report, the Organisation for Economic Co-operation and Development (OECD) warned that Spain has experienced a 69-percentage-point increase in public debt relative to GDP since 2007, surpassing all other EU countries. This makes Spain the second-fastest-growing debt nation among developed economies, trailing only Japan.

This alarming rise puts Spain in a difficult position, requiring stricter financial policies to control debt and reduce the deficit. However, implementing austerity measures could provoke public backlash, particularly given the current economic conditions and rising living costs.

For full details: OECD’s official report

NATO Pressure and Military Spending

Beyond its debt crisis, Spain faces mounting pressure from NATO to increase its defense spending. Currently, the country allocates 1.24% of its GDP to military expenditures, making it one of the lowest spenders within the alliance. However, Spain plans to gradually raise this figure to 2% by 2029.

This pressure comes amid growing geopolitical tensions, as European nations seek to strengthen their defenses against security threats, including Russian aggression and regional conflicts in the Middle East and North Africa.

However, boosting military spending means diverting financial resources from crucial sectors like healthcare, education, and social welfare. This raises concerns about how the government can balance its defense commitments with pressing domestic economic needs.

More on this topic: How does military spending impact the economy?

Spain’s Future Challenges

As costs rise and international pressure mounts, Spain faces a critical challenge in balancing its economic policies with defense commitments. Continuously increasing public debt could erode investor confidence, negatively affecting financial markets and forcing the government to take more drastic stabilization measures.

Additionally, higher debt servicing costs will limit the country’s ability to fund new development projects, potentially slowing economic growth. At the same time, ignoring international calls to boost defense spending could strain Spain’s relations with its NATO allies, particularly amid growing global security threats.

In the coming years, the Spanish government will need to make strategic decisions to maintain financial and economic stability while meeting its international and defense obligations.

Share your opinion: Do you support increasing defense spending despite rising debt?