Spain must face up to public dept issues

Rising public debt in Spain means that the country is facing severe "funding stress", Moody's Investors Service has said this week.

Accumulated public debt in the country has risen to 60 per cent of GDP - up from 53.2 per cent at the end of 2009.

As a result, concerns have been raised by those in the financial sector that investors may start to demand higher returns in order to lend money both to the government and private sector.

If the ten-year interest rate on Spanish debt was to exceed six or 6.5 per cent it would become impossible for Spain to stabilise its public debt ratio in the future says Patrick Artus, analyst with French financial services group Natixis.

"It is therefore reasonable to think that if investors turn pessimistic on Spain as we believe they will and if long-term interest rates exceed this threshold Spain will have to, like Greece and Ireland, ask for support from other European countries and from the IMF," he said.

Individuals looking for real estate in Spain may want to take advantage of the large number of distressed properties in the country which are often available with large discounts.

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