MADRID (AP) — Spain's public debt load has doubled since 2008, the central bank said Friday, as the government sought to talk calm into markets worried that the eurozone's fourth-biggest economy might need a bailout.
The Bank of Spain said that as of the end of the first quarter, the combined debt of the central, regional and local governments stood at 72 percent of gross domestic product. That's up from 65 percent in the same quarter last year and 68.5 percent at the end of 2011.
It's also double the 35 percent debt load that Spain had in early 2008, when the country's financial woes began with the bursting of a real estate bubble that had fueled years of growth.
The government has predicted that the debt load will hit 80 percent by year's end, though economists expect it to rise even further as a result of its acceptance of a €100 billion ($125 billion) loan to prop up its fragile banks. Because the government will be responsible for repaying the banks' bailout, the sum will add to its public debt.
Spain is applying across-the-board cutbacks to slash its debt and deficits, but ishaving to do so at a time of recession, with unemployment near 25 percent. The austerity measures risk backfiring as they hurt the economy, depriving the government of valuable tax receipts.
They have also sparked strikes and protests, some of them violent.
Striking coal miners armed with homemade rockets and slingshots clashed with police in northern Spain on Friday, leaving seven people injured, two of them seriously, the Interior Ministry said.
The miners are concerned that a reduction in mining subsidies from €300 million to €110 million ($375 million-$137 million) a year will devastate their centuries-old industry.
Spain's debt load compares favorably with many other members of the 17-country euro union — Germany's debt ratio stood at 81.2 percent at the end of 2011, while Greece's was 165 per cent and Italy's 120 percent. What worries investors is that the Spanish government may be unable to handle even its relatively modest debt load as the economy keeps shrinking and banks' losses mount.
Spain agreed at the weekend to tap a bailout loan from the eurozone to use on in its banking sector. As this agreement involves first lending the money to the Spanish government, there are concerns that taxpayers are ultimately on the hook for the banks' bad decisions. The deal will likely raise Spain's debt and deficit levels.
As concerns over the country's financial future fester, its government borrowing rates remained dangerously close to the levels that forced Greece, Ireland and Portugal to ask for bailouts of their public finances.
The interest rate — or yield — on the country's benchmark 10-year bonds slipped Friday morning to 6.75 percent, then rose again to 6.87 in late afternoon trading, according to financial data supplied by FactSet. This equals the rate's euro-era closing record also attained Thursday. A rate of 7 percent is considered by analysts to be unsustainable in the long term. The comparable German rate was 1.45 percent.
Deputy Prime Minister Soraya Saenz de Santamaria told a news conference that Spain will recover from the crisis and the bank rescue plan will help, but said Europe as a whole has to complete its monetary union by tightening fiscal policy union. That could mean sharing debt risk by issuing joint bonds or instituting an EU-wide bank deposit guarantee fund.
"Without a doubt we all have to work toward more Europe, toward greater changes that allow us to overcome this difficult moment," she said.
Financial markets were mostly higher on Friday as investors took heart from speculation that global central banks are ready to provide monetary stimulus if the eurozone financial crisis deteriorates.
Alan Clendenning and Harold Heckle in Madrid contributed to this report.