The national debt is around 89.6% of GDP as of May and grows closer to the 91.6% debt ceiling for this year. The debt figure has hemmed and hawed all year, trending with how Spain raises funding through the Treasury and services its debt. Because the level is so high already, it's going to be hard to avoid hitting the debt ceiling. Montoro is looking at a tough problem. In what's left of this government's term in office, the volume of Treasury emissions will go up by just over 200 billion euros. That indicates that in order to meet EU-mandated budget targets, some of this year's deficit will be shifted to the national debt.
The difficulties attached to keeping debt below target levels explains why Spain has delayed its plan to finally pay service providers 7 billion euros of back-payments corresponding to 2013 invoices. Montoro promised to pay sanitation, pharmaceutical and other companies what they were owed for services they provided for various Public Administrations.
But nobody has received their money. Administrations will not start paying service providers until the end of this year in hopes of not adding to the 7 billion euros of debt associated with the Service Provider Payment Plan. The Finance Ministry has not enforced an EU mandate that requires governments to pay service providers within 30 days of an invoice. Its failure is a bitter reality that has hurt many companies that are trying to keep their businesses afloat during these troubling times.
Within the network of multinational creditors, few understand how the Spanish government can act so informally, and many are starting to take their investments to other countries. Since the spring of 2012, Montoro has assured that governments will stop defaulting on their debt. But we have already had to implement two payment plans for backpayments that governments owed on services, and now the third payment plan is experiencing delays. In this sense, the problem persists because of the government?s inability to solve it.
