2 days Ago By Núria Rius
The Airef (Fiscal Institute) has reprimanded the Spanish government for its pension reform. This Monday, the tax authority published the results of the first major review of the approved changes. , and although it concludes that the "spending rule" of the pension system is being complied with—although it questions its calculation—the agency warns that the sustainability of this system "has not improved.
" From the outset, Airef notes that the so-called spending rule is being complied with, the main element that Brussels takes into account when making a ruling on the Spanish pension system. This means that the balance between revenue and expenditure in the long term (specifically for the period 2022-2050) is in line with the commitment made by the Spanish government to the European Commission, and which implies that during this time, average net spending on pensions in relation to revenue cannot exceed 13.3% of GDP.
In fact, after observing expenditure and revenue, Airef places the figure at 13.2%. If the 13.
3% limit had been exceeded, the so-called "closure clause" of the reform would be activated. This clause obliges the Spanish government to review the reform and adopt new measures, either through revenue, expenditure, or both at the same time. These measures would have to be approved by the Congress of Deputies within a maximum period of one year.
Otherwise, workers' contributions would automatically increase, as stipulated in the reform approved in 2020 and which began to be rolled out in 2021. However, the supervisory body leaves the calculation of this spending rule almost on paper, to the point that the . The Airef questions whether it is a good tool to calculate whether or not the pension system is sustainable, that is, whether the income obtained, especially through contributions, will be sufficient to cover the future expenditure of the system, taking into account that we are on the verge of the largest generation, that of The tax authority links this to the fact that it is a calculation "very sensitive" to changes, such as demographics.
It also highlights the fact that it is not a specific rule for Spain, but rather the same formula is used for all EU countries. Finally, it criticizes the law's strictures regarding the elements that the Airef must use. "We cannot apply our own methodology [.
..] we [the Spanish government's reform] are told what we should observe and how we should do it," said Airef president Cristina Herrero.
Sustainability warning But Airef's cold-water treatment of the Spanish government comes not only from the way the spending rule is calculated, but also from the sustainability of the pension system in general. The agency warns that sustainability has not improved compared to the last analysis it conducted in 2023. In fact, it already noted at that time that the pension reform was insufficient to cover future spending.
When Airef points to sustainability, it focuses on the growth of net spending in the pension system, that is, the money spent to cover benefits, especially pensions. The agency predicts that pension spending will grow by 3.4 points of GDP until 2050, which represents a slight increase compared to its analysis two years ago, when it estimated spending growth in 2050 at 3 points of GDP.
The Airef is putting the spotlight on future sustainability and spending because in the coming years the generation of the , the largest, and therefore the number of benefits that will have to be paid will increase, especially retirement benefits. This generation includes those born between the late 1950s and 1970s, when there was a demographic peak in Spain. This clashes with the current demographic trend in Spain, marked by a falling birth rate.
During his time as Minister of Social Security and architect of the reform, José Luis Escrivá asserted that the changes introduced made the Spanish pension system sustainable. The pension reform initiated in 2020 was designed to ensure that the anticipated strain by 2050, when spending will peak due to the retirement of this entire generation, would not trigger an earthquake in terms of both sustainability (ensuring there is sufficient income) and equity (which generates them in terms of equity). This horizon is reached with the so-called far from being full, although some of the measures deployed to obtain greater income are expected to fill it over time.
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