Spain's debt to jump to 78 pct of GDP

 

Spain's public debt will surge to around 78% of GDP this year, from 68% in 2011, Economy Minister Luis De Guindos told The Wall Street Journal in an interview.

Spain's debt-to-GDP ratio is substantially lower than the other countries struggling most in Europe's debt crisis, but it is already well above the European Union's recommended 60% ceiling and will continue to rise largely due to its inability to generate growth while it cuts budget spending.

As the southern European country battles to convince European Union partners and debt markets it can rein in its deficit, De Guindos also said Madrid must strike the right balance between deep spending cuts and going too far in its austerity bid.

"If you don't make enough adjustments, markets will penalize you. But if you go too far, markets could also penalize you," he told the paper.

Spain on Friday announced it would cut €27 billion from the central government budget over the rest of 2012, equivalent to around 2.5% of GDP.