Public finances face a significant challenge this year. HE European Central Bank (ECB) will reduce its loan portfolio throughout 2024 Spanish public debt (state, regional and local) in some areas 38 billion euro, 2.6 times more According to calculations prepared according to the information published by the institution, it is more than 2023. measures that are part of the fight to reduce inflationIt will force the Spanish administrations to search other buyers. Public sector last year had no problems to find them, but vice versa. However, the ECB’s gradual exit from the euro area’s public debt risk for most indebted countries In case of tension in the markets, monetary unions such as Spain may be abandoned.
Therefore, the monetary authority 4.23 billion euros was in the eurozone’s public debt at the end of last year. big purchases made between March 2015 and June 2022 in order to avoid deflation until 2020 and then an economic fiasco during the pandemic. The inflationary spiral caused the ECB to stop increasing purchases in July 2022, but this increase continued for some time reinvest The entire amount received for the debt as it matures. In March 2023, the ECB stopped reinvesting part of the amortizing debt, thus portfolio started to weaken. It increased the non-reinvestment portion in July and will increase it additionally in the second half of 2024 until reinvestments are fully exhausted in 2025.
However, this will be a gradual process: half life of debt Slightly above the public figure in the ECB’s portfolio seven yearsThis means that there are much shorter-term securities and much longer-term securities (for example, the Spanish Treasury’s Three monthsbut also 50 years). But the direction is clear. ECB’s target harden even more offers and prices financing in the euro area (Due to the decrease in the demand for their part of the public debt, this Bank loan Yet commercial debt), thus cooling the consumption and investment of households and companies and so moderate inflation.
growing challenge
This is not a new challenge for Spanish public finances, but increasing size. The ECB has already reduced the Spanish public debt portfolio by approx. 14.3 billion euro last yearis approximately equivalent 2.8% More than at the end of 2022. 38 billion It represents the year 2024 7.7% something more 494 billion in Spanish debt The ECB’s holdings at the end of 2023 (approx. 80 percent is provided by the state the rest is provided by regional and local governments). Unless plans change, the figure 2025 will be even more cumbersomeDue to the complete end of reinvestments announced in the middle of last December.
The reduction in Spanish public debt held by the European Central Bank last year, yes, was absorbed thanks to the increase in purchases private investors. In the case of government debt, the central bank reduced the Treasury debt portfolio by: 11.558 million through October (latest data available). Private investors, on the other hand, purchased securities at higher prices. 89 billion Thus, both the decrease in the central bank’s debt (11,558 million) and the increase in debt were covered. 77.564 million total debt was (1.31 trillion). At the beginning of the purchases foreign investors (41.014 million) and houses (21,554 million, mainly due to their enthusiasm for Treasury bills).
Security bug
Thus, private investors benefit from these advantages. interest rate increase public debt arising from increase in official rates By the ECB: emissions Average rate of government debt last year 3.44%Compared to 1.35% in 2022 and -0.04% in 2021. The important thing is that this increase in rates did not go hand in hand with the state’s problems with its own finances, unlike what happened during the debt crisis of 2012. Increase in interest on issued debt less than to those who reference typesat 4.5 percent after the increase 4.5 percentage points Since July 2021.
sueAlso, it remains highAs the Treasury’s 10-year bond issue last Wednesday shows, purchasing demands nine times bigger the amount deposited and higher registered for a sovereign issue history of euro. Next to you risk premium The difference in profitability between the 10-year Spanish bond and the benchmark German bond in trades between private investors – an indicator of default risk in the eyes of the market – is mainly stable around 100 basis points. “This is the reflection of the heights investor confidence In our economy and in Spain’s economic prospects,” the new Minister of Economy said on Tuesday. Carlos’ Body.
The other side of the coin has been warning for a long time. Governor of the Bank of SpainPablo Hernández de Cos: one of the best risks The Spanish economy is “a structural public deficit and one Public debt raisedrepresenting the source security bugespecially in this context higher financing costs“. And even more as the ECB reduces its portfolio. If investors continue trusting There need be no problem with the Eurozone’s public debt. But it can always reappear insecurity As has been the case for several weeks in the spring of 2022, public finances have moved towards countries perceived to be weaker. The European Central Bank itself announced at that time that it would borrow from these countries again, but this would only be possible if the increase in risk premiums was taken into account. he wasn’t right.
Estimated European Central Bank (ECB) will reduce its portfolio Spanish public debt in some 38 billion The rise of the euro throughout 2024 responds to two factors. That’s why the monetary authority owns Spanish public securities. two purchasing programs different: known as APPLICATION (created to avoid deflation and expanded by covid making acquisitions between March 2015 and June 2022) and the so-called PEPP (published by Pandemic and has made acquisitions through March 2022).
At the end of December, the Central Bank 301.989 million Spanish public debt Via APP represented around (state, regional and local) 11.7% of 2.575 billion This is what I have in total for the program. ECB stopped reinvesting There are securities in the said portfolio that matured as of last July, and the total depreciation in 2024 is approximately 264 billion euro. Some guesses Spain 12% and 13% of the amount in question, i.e. approximately 33 billion euro.
On the other hand, the monetary authority 192.989 million Spanish public debt via PEPP at the end of November 11.62% of 1.66 billion totals. ECB continues reinvest Games that expire but start in July I will stop doing this will reduce its portfolio by 7,500 million per month for the entire second half 45 billion. In this case, the public debt of the organizations is also in question. supranational debt in the euro area business. Excluding these, it is estimated that the amortization of public debts will be around 200 million. 40 billion. And if the weight of the Bank of Spain in the Eurosystem (close to 12%) is applied to this amount, Spain corresponds to some 5 billionThis number added to the APP of 33,000 million leads to a figure of approximately 38,0000 million.