Draghi’s Bond Rally Masks Debt Doom Loop Trapping Spain

The bond rally that has sent Spanish borrowing costs to 10-month lows has distracted attention from the nation’s growing debt pile.

Spain’s budget deficit probably exceeded 9 percent for a fourth year in 2012 as Europe’s highest unemployment rate, a third recession in four years and the cost of bailing out its banks offset almost all of the government’s 62 billion euros ($83 billion) of spending cuts and tax increases, according to economists at Societe Generale SA, Lombard Street Research and the Madrid-based Applied Economic Research Foundation.