Spanish national debt continues to rise

Spain's national debt increased more than 10% in 2012 and will have grown from 86% of GDP to 90% of GDP. Since the crisis began, public and private sector debt have traveled very different paths. In 2005, Spain had a low level of public debt -- around 36% of its GDP -- while the private sector was over-leveraged.

Those were the days when you could hear big time contruction businesspeople saying "money is not a problem." Credit was flowing to companies and families alike, leading them to make bad decisions. Many companies increased their debt in order to grow organically with deals that they were forced to abandon later. When the real estate bubble burst during the first peak of the crisis, a million jobs were lost. In 2012, companies listed on the Spanish stock market made major efforts to de-leverage themselves and drove down their debt to pre-crisis levels. Still, the IMF warned that Spanish corporate debt still represented a considerable risk and should be cut by 20%.

It will be even more difficult to curtail Spain's public debt, which could force us to endure stiff sanctions if the G20 decides that the maximum debt/GDP ratio for European nations is 90% and we get closer to the 100% level. Zapatero did not now how to face the debt problem and Montoro's management strategy is weakening. Instead of cutting redundant public sector jobs and reforming government administrations, he is masking part of the deficit and increasing the national debt.