External Debt on developed countries: Spain

The impact of debt on economic growth is not just on developing countries but also on developed, on which the levels of indebt, corruption and wrong political decisions plays a key role on the road for a successful jump to a real and effective economic growth. Particularly after the recent global financial crisis that brings more instability to an already important levels of external debt.

Just to see the example of Spain: is the 2d country after USA with more volume of external debt. But there is a significant difference between both countries:  for the USA that debt represents 34% of his GDP and for Spain more than 100% of their economy (1 billion euros). If we add that the forecast of growth rate for the next years is of 2,8% we realize that the possibility of a way out is not clear, particularly because it is not accompanied by in-depth reforms on finance structures and fiscal policies. Another aspect that have been pointed out by the European Commission is the investment on infrastructures: “Spain need to harmonize with the rest of the EU” and resolve the imbalance created in public finances because of an over dimensional transport network. Is it probes that the investment of 1% of GDP on infrastructure raise the production level around 0,4% the same year however, Spain have left behind a period of exaggerated investment on infrastructures (some of them unnecessary) to a current period of no investment when is absolute needed and strongly suggested also by the IMF.  Repeatedly the IMF has encouraged indebted countries to cut with external financial dependence by refloating their own local economy.

After a long period of recovery from the global financial crisis all developed countries, particularly European, need to establish common fiscal and finance structures able to help on the boost of national productivity in a coherent strategy of foreign trade policies. All this actions tend to reduce external debt but in any moment to eliminate it, by the contrary in the case of Spain the expectation is of an important rise for the next years, that could only be stopped by debt forgiveness. On the meantime more inequality and poverty is awaiting.

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