This site has been archived on 27/01/17

Navigation path

The website of the Directorate General for Economic and Financial Affairs has moved.

You will find all publications issued after July 2015 on the new web presence.

Spain's external deficit: how is it financed?

Author(s): Alberto Cabrero, Luis Angel Maza and Javier Yaniz (Directorate-General for Economic and Financial Affairs)

Spain's external deficit: how is it financed? pdf (86 kB) Choose translations of the previous link 

In 2006 the external net borrowing requirement of the Spanish economy was almost 8% of GDP, after having been in balance between 1993 and 1998. This increased borrowing requirement is the financial mirror image of a growth model, in which corporate and households' investments are generating an unprecedented private demand for credit. Although the solvency of Spanish borrowers does not seem to be at risk in the short term, in the medium and long run, any widening of the already extensive recourse to external saving might lead to additional pressure on the economy.

An assessment of external imbalances should include scrutiny not only of the existing financial instruments and who issued them, but also of cumulated debt levels, i.e. an analysis of flows and stocks. According to the findings of this country focus, it is portfolio investment, rather than FDI, which is the main financial instrument, while the financial system - and not the corporate sector or general government - has become the main channel between domestic borrowers and private foreign lenders.

(Country Focus 07. June 2007. Brussels. 6pp. )

Additional tools

  • Print version 
  • Decrease text 
  • Increase text