Spain is running out of fiscal margin to cope with future crises such as catastrophes, wars, or pandemics.

Spain is running out of fiscal room to cope with future crises such as catastrophes, wars, or pandemics. Based on facts observed and verified directly by our journalists or by informed sources. Choose us as your preferred source on Google. The rise in interest rates will skyrocket interest spending by 46% over five years to reach 63.700 billion euros, equivalent to 70% of everything the country spends on education. Since the world entered the 1920s, there has been a rapid succession of catastrophes and armed conflicts that have shaken the economy. Spain has lived through an unprecedented pandemic in a century, a volcanic eruption, a historic snowfall, severe floods in Valencia, and two wars that caused an unprecedented energy crisis for decades. In the face of all these dramatic events, the Government has had to dip into the treasury to cushion the damage to citizens' pockets. The bill has not been cheap. According to Airef, the pandemic had a fiscal cost of 35,000 billion euros, the aid packages for the war in Ukraine exceeded 40,000 billion, and the DANA in Valencia was around 12,500 billion. Furthermore, the Executive has spent 8,600 billion euros on relief measures for the war in Iran, according to the Bank of Spain. So far, the Spanish Executive has faced these expenses thanks to a combination of strong economic growth and historically low interest rates. The pull of tax revenue—in part due to the lack of inflation adjustment in income tax—and cheap debt have allowed to finance that huge amount of expenditures. However, the fuel provided by these two factors is running out and leaves Spain with little room for action in the face of future crises. The rise in interest rates occurring around the world due to a new inflationary outbreak increases financing costs. Borrowing becomes more expensive for Spain (and most countries in the world). Meanwhile, the debt that is 'dying' because it is being paid off must be replaced by new liabilities. The problem is that this old liability was issued at very low interest rates, but the new debt is much more expensive to place. Specifically, the average interest rate on circulating debt is 2.45%, but issuing new liabilities costs Spain an average of 3.41% according to Treasury data. This leaves an increasingly narrow space to approve support measures in the face of future crises. "The capacity to face new shocks, and we know that the most likely thing to happen are new calamities, will be smaller," summarized Raymond Torres, director of Coyuntura of Funcas, during the presentation of the organization's macroeconomic projections. Funcas estimates that economic growth will slow down in the coming years while the public deficit rises. Furthermore, the State will have to face this greater imbalance in public accounts with less financial ammunition. The center for the former savings banks predicts that interest spending will skyrocket by 46% in the next five years. From the current 43.350 billion, it will be 63.779 in 2031. This figure is equivalent to 70% of the entire country's spending on education in a year, Torres warns. In view of this situation, the center for studies calls on the administrations to generate a "budgetary cushion" while the economic cycle remains positive to "not completely lose budgetary room in the future." "We have lived a lot of years with interest rates close to zero. Financing was very easy; this gave governments, but also families, room to borrow and spend on consumption and investment. That is over," points out Carlos Ocaña, director general of Funcas. "Financing is no longer at zero or near-zero rates, and that makes it impossible in the future to take measures like those taken with the Ukraine crisis and the pandemic," he adds.