Spain debt rises on aid to banks, regions Sat Sep 29, 2012 11:01am EDT MADRID (Reuters) - Spain's debt level and borrowing needs are set to rise next year, piling pressure on the government to apply for international aid, as it pours funds in to cash-strapped regions and an ailing banking system, its budget showed on Saturday. Spain's debt as a ratio of gross domestic product will reach 90.5 percent by end 2013, according to the document presented to Parliament for approval, almost three times that registered before the property bubble burst in 2008. The budget aims to make savings of around 13 billion euros ($16.72 billion) next year by cutting spending by the public ministries, education, health and infrastructure investments and freezing public workers' wages. "This is an austerity budget, but will serve to help us get over this long economic crisis and once again show that Spain is a trustworthy partner within Europe," Treasury Minister Cristobal Montoro told journalists after delivering the budget. Calls by wealthy northeastern region Catalonia for independence and the rising number of demonstrations on the streets of major cities have fuelled doubts Spain can fix its problems without help. Prime Minister Mariano Rajoy has delayed any plea for aid, which would kick-start a European Central Bank plan to buy debt and ease financing costs, though this week has passed reforms and the budget plan in what many see is an effort to pre-empt the likely terms of a bailout. The budget details spending cuts of 3.1 percent in health, 14.4 percent in education and 6.3 percent in unemployment benefits, as the recession, which began in the first quarter, drags on. The government would also have to increase its reliance on international markets for funding next year, with gross debt issuance requirements of 207.2 billion euros after budgeting in 2012 for gross issuance of 186.1 billion euros. Spain faces debt redemptions worth 159.2 billion euros in 2013, up slightly from 153.2 billion euros in 2012, the document showed. The increase in the debt-to-GDP ratio was due to a greater debt on the back of the economic crisis and the effect of state instruments on public accounts, the Treasury said in the document. Brussels on Thursday said the budget was a large step in the right direction. But many economists expressed doubt that Spain's conservatives would be able to raise the cash the budget demanded as pension and debt-servicing costs rise. "My general view is that this is an optimistic budget, in the sense that predictions for the contraction in 2013 are very optimistic," said Xavier Vives, economist at business school IESE, adding that he expected the plans to be revised as with every other budget over the last four years. Spain will meet its 2012 public deficit target as dictated by European guidelines, Montoro said, but the shortfall will jump by more than one percentage point if aid to its struggling banks were taken in to account. The Spanish deficit this year would be 6.3 percent of GDP, not including these payments to its banks, he said, but would rise to 9.4 percent of GDP last year and 7.4 percent of GDP this year if the aid was considered. "Everything within the deficit derived from financial operations aren't included ... they're considered one-offs," Montoro said. Spain has asked for up to 100 billion euros for its crisis-hit banks, though the debate among Spain's European partners rages over whether that money would go directly to its lenders or first via public coffers. ($1 = 0.7773 euros) (Additional reporting Nigel Davies and Paul Day; Writing by Paul Day; editing by James Jukwey)