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Business

Spain's debt surges to record, compounds budget woes

Spain's public debt hit a new record in July, increasing concerns the country might not meet its budget deficit targets this year. However, a glimmer of hope comes from progress in Spain's debt-laden autonomous regions.

In the second quarter of 2012, Spanish sovereign debt soared to 804 billion euros ($1.046 trillion), reaching 75.9 percent of the country's Gross Domestic Product (GDP), the Bank of Spain announced Friday.

The figure is up from 774 billion euros in the first three months of this year, when the shortfall amounted to 72 percent of the Spanish GDP.

According to the Spanish central bank data, the capital owed by the central administration increased by 4.4 percent in the months of April through June, while the debt of the country's semi-autonomous regions went up by a more moderate 2.8 percent.

Debt reduction in the regions made "significant progress," Finance Minister Cristobal Montoro said, referring to the regions' efforts to rein in huge deficits, which they were able to cut to just 0.77 percent of their GDP.

However, the high debt figure for the central government in Madrid is set to raise doubts about the country's ability to meet its budget deficit target of 6.3 percent for this year.

In 2011, Spain's total deficit came in at 8.9 percent of GDP, shattering investor confidence in Spain's capacity to service its debt, which had led to exorbitantly high borrowing costs for the country.

The European Central Bank on Thursday expressed concern that Spain's sovereign debt could jump above 100 percent of GDP by 2016 if the country failed to meet its austerity commitments.

uhe/tj (Reuters, AFP, dpa)