Legal Framework

The issue of Public Debt must be authorised by law.

The General Pondgetary Law gives the government a fairly free hand in public debt management, with the sole limitation that it must observe the restrictions imposed in each year's State Budget Law or in other legislation in force.

Specifically, each year's State Budget Law sets out the main guidelines governing public debt issuance in the corresponding year and establishes an issuance ceiling. This is a global limit which makes no distinction between types of public debt (domestic or foreign currency issues, particular instruments, etc.). Thus, the government, and by its delegation the Minister of Economy and Finance (who in turn delegates most of his powers to the General Directorate of the Treasury and Financial Policy) can freely choose any kind of debt instrument, its characteristics and the issuance procedure to apply. It can likewise vary the total amount of outstanding debt by means of additional issues, early redemptions and exchanges. All these aspects are regulated in a Royal Decree and a Ministerial Order approved and published at the start of each year.

Finally, the Resolutions of the General Directorate of the Treasury and Financial Policy lay down more specific details for the conduct of debt issuance through the year, such as the calendar for ordinary auctions or equivalence tables between prices and yields.

Meantime, the Bank of Spain acts as the State's financial agent through the management of the Book-Entry System, in which operations transacted in the Spanish public debt book-entry market are settled and cleared. This remit is perfectly compatible with the limitations established in the Maastricht Treaty and transposed in Law 13/1994, of 1 June, on the Bank of Spain's Independence, as regards the prohibition on the monetising and privileged financing of the public deficit. For this reason, rules also emanate to a significant extent from the Bank of Spain Circulars.