Spain no longer in EU’s pocket

Spain has paid down its debt to the EU by a third in the past year

What a difference a year makes: figures released this week by the Spanish Central Bank show that Spain has reduced its debt owed to the EU by almost a third in the past 12 months – with the debt owed shrinking even further in the first quarter of this year…Such boring Euro-babble may not seem important, but this data reveals an encouraging trend that has gripped Spain in the past few months: one of confidence, optimism and a sense of a glowing light at the end of what has been a long, dark and often disorienting tunnel.

Debt owed by Spain to the European Central Bank was reduced by 29 per cent over the course of 2013, which is an incredible performance when one considers that the country was mulling a second round of bailout funds from the EU as recently as December 2012. Begging for money from Europe is a sure way to turn other nations against you, and Spain has had to face its fair share of flak over the past few years.

Now, however, the attitude is one of admiration at the way the country has set about reforming many parts of society and economy. Prime Minister Mariano Rajoy’s tough labour reforms have helped stabilise and slowly mend the job market, while business in Spain’s automotive, tourism, hospitality and export industries has been brisk.

This encouraging economic performance has been in stark contrast to Spain’s ‘Club Med’ bedfellows, with both Portugal and Greece requiring a rescue package from the EU. Overall, Spain still required €40 billion from Europe, with the majority of funds steered towards its bad bank Sareb, which was set up to ease the toxic bad property loans that had flooded the sector.

Today, latest figures from the Spanish Central Bank reveal that Spain’s commercial banks are now able to operate normally and prudently on the markets, and have even begun to increase their lending once more – a situation that has freed up Spain’s mortgage market and will, in time, set the wheels turning at full pace in the property sector.

After paying down most of its debt, Spain now owes the European Central bank €182.4 billion – down from €257.2 billion at the end of April 2013. While that figure may seem impossibly large, the country was able to eat into it while struggling through a recession. In 2014, Spain is clear of recession and expected to grow its GDP by as much as 1.7%. Should it do so, the country can expect to clear more than a third of the remaining debt by this time next year.

Indeed, compared to August 2012 when Spain owed €388.7 billion, the current figure looks more than rosy.