Minister José Luis Escrivá’s recent pension reform will leave a public deficit of up to €22,000 million in the public coffers in 2023 alone, with its consequent negative effects on employment, growth and the competitiveness of the Spanish economy. This is what is stated in the latest report by the Institute of Economic Studies (IEE in its Spanish initials), which, under the title “La subida de las cotizaciones sociales (The rise in social security contributions). Analysis and Consequences for the Spanish Economy” addresses the current situation of our pension system and includes a critical analysis of the 2023 reform, with a starting point: the system’s deficit.
The deficit of the public pension system, which in 2023 could reach 1.8 points of GDP, after having injected revenue amounting to 1.4 points of GDP by means of a transfer from the State aimed at so-called improper expenditure, where highly diverse concepts are grouped together.
If this result, the 1.8 of GDP deficit (€22,000 million), is achieved, Spanish public pensions would account for more than the structural deficit of the general government as a whole, and practically 90% if the aforementioned improper expenditure is taken into account. Moreover, the report points out that the pension reform will end up affecting employment, with job losses ranging from 100,000 to 190,000. GDP will also suffer by 0.6%, and consumption and private investment by 0.5% and 0.2% respectively.
The report estimates that 87% of the extra revenue will come from employers’ contributions, which means that by the time the measures are fully deployed, companies will be paying social contributions worth 10.7 percentage points of GDP (€150 billion) by the middle of the century.