The macroeconomic drivers of fiscal sustainability
Fiscal sustainability
Fecha: noviembre 2025
Antonio Fatas
SEFO, Spanish and International Economic & Financial Outlook, V. 14 N.º6 (November 2025)
Public debt ratios across advanced economies remain well above pre-pandemic levels, but Spain stands out as an exception within the euro area. After peaking at 120% of GDP in 2020, Spain’s debt ratio declined to 107.5% in 2024—almost five percentage points below the EU average and nearly ten points lower than in France or Italy. This improvement reflects a favorable interest rate-growth differential, strong labor market performance, and robust immigration inflows that expanded the tax base. Interest payments have fallen to just 2% of GDP, half their 1990s level, allowing debt reduction without major fiscal consolidation. Yet this benign dynamic is unlikely to persist. Demographic projections indicate that age-related spending will rise by over five percentage points of GDP by 2070, while potential growth remains constrained by low productivity and a maturing labor force. Ensuring fiscal sustainability will therefore require structural reforms to boost growth and preserve the credibility of Spain’s public finances in a less forgiving macroeconomic environment.