Public Debt Accumulation in Spain: the Result of its own Recession, not its Cause

The public debt crisis is a hot debated topic nowadays. Many southern member states accumulated too much public debt and have to pay very high interests on their debt which makes it even more difficult to meet payment obligations. One of those countries that faces a high interest rate is Spain (6%), but its public debt is lower as a percentage of GDP compared to Germany, while Germany faces the most attractive interest rate of the Eurozone (1%). This paper analyses the underlying vulnerabilities of the Spanish economy, being the real estate sector, the lack of international competitiveness and private debt accumulation by households and corporations. These vulnerabilities triggered a deep recession in 2008 and made public spending inevitable to lessen the recessionary effects leading to high annual deficits and higher interest rates on government securities.