SPAIN’S government will have to continue increasing taxes until 2014 to mop up its deficit, a leading business school believes.

According to experts from the IESE, for the country to cut its Gross National Product deficit by just 3.1 per cent, the population could see interest rates and taxes going up steadily for the next four or five years.

Spain’s overall GNP debt was 42.7 per cent in 2007, and unless measures are taken – which will also include reduced public spending – this could rocket to 69.2 per cent by 2014.

The government will need to claw back around 30,000 million euros to prevent this happening.

Both inflation and interest rate rises are predicted for when the recession is over, a situation that the IESE has likened to the financial crisis of the early 1990s.

Finance experts do not believe Spain is likely to see any growth without a radical overhaul of the economy, enabling it to create more jobs and in particular more productive employment than that of the construction and service industry, which have been the hardest hit over the past three years.

They say current policies may help to prevent an economic depression, but are ‘creating huge imbalances for the immediate future’.

This recession, says the IESE, is worse than that of 1929.