Who has seen us, and who sees us. The risk premium of Spain has fallen on Wednesday below the 60 basic points, a minimum of early 2021, when the European Central Bank (ECB) intensified as never the creation of money to buy bonds from the Eurozone countries and avoid a new debt crisis after the shock of the COVID.
Now, with the ECB in withdrawal of the financial markets since mid -2022, the differential between the interest that investors demand in the financial markets to the reference debt of our country (3.3% for the 10 -year bonus) and that of the German (approximately 2.7% for the ‘Bund’) has narrowed.
The most immediate reason is the pact between conservatives and social democrats after the latest elections in the great state of orthodoxy (the most reliable European payer) to increase public spending in defense. In the background, other investment needs appear due to the stagnation of the economy, and mainly of the industry, and by the commercial war. Meanwhile, Spain is the great EU economy that grows the most and continues to reduce its fiscal imbalances (deficit and indebtedness).
The risk premium reflects precisely that. How reliable you are as a country regarding Germany when returning the debt. It is a measure of measuring that in the crisis of the euro after the outbreak of the 2008 real estate bubble came to shoot for Spain to the 600 basic points – our bonus came to approach 8% in July 2012 -, causing the rescue of the banks and the intervention of our economic sovereignty by the ‘Troika’ (European Commission, IMF and ECB).
The photo is totally different today. Many dogmas of that time on public spending and the consequences of austerity have fallen, and our country is the most prominent positive exception in the Eurozone in the face of Germany’s weakness, and the uncertainties surrounding France already Italy. The first important sign in this regard was that Spain began paying less for its reference debt than our Gauling neighbors since the end of September 2024. Something that did not happen precisely since 2008, when our economy was artificially fans.
These financial milestones do not respond now to a bubble, but are the result of the sum of a structural transformation of the economy of Spain by the policies deployed since 2020 by the coalition and, in contrast governments, a period of greater political and economic uncertainties in the rest of the Eurozone.
A new role in Spain in financial markets
One of the keys is that, for months, foreign investors are replacing the ECB as the main debt buyers in Spain, attracted by the outstanding economic growth of our country and a greater reduction in fiscal imbalances with respect to Italy and France.
The funds, banks, insurers and retailers from beyond our borders have raised their weight by 5.1 percentage points of the total in the possession of bonds (medium and long term debt) of Spain from May 2022, to reach 45.1% at the end of 2024.
Since then, the ECB has backed 7.1 points its weight, until it is below 30% of the total. The two points of difference have been covered by national investors, especially banks, according to official treasure data collected by the last ‘Debt Observatory’ of the Independent Fiscal Responsibility Authority (Airef).
The ECB, through the Bank of Spain, came to touch 37% of the possession of bonds of Spain in 2021. In 2020, the monetary institution intensified the policy of ‘creation’ of money and acquisition of debt of the eurozone countries to favor economic recovery and to avoid a crisis of the euro, given the extraordinary effort in public spending – which triggered the public deficit and, therefore, the financing needs pandemic.
In mid -2022, the ECB ended this sovereign debt purchase policy as part of the strategy to fight inflation, together with the increases in official interest rates. The objective was to withdraw market liquidity, raise financing costs and, ultimately, stop consumption, investment and activity in general and thus moderate price increases.
This process of monetary austerity has been suffered by families, companies and states, but in the specific case of Spain, as a country “issuer”, the appetite of foreign investors by our debt has shrouted that increase, containing the burden of interests to which we face each year with respect to GDP.
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