The Silent Reform Of Pensions

Spain's Social Security needs a new social pactSpain needs a new intergenerational social pact

Fernando González Urbaneja | Spain has a critical and essential employment problem: high chronic unemployment and job insecurity. Both of these are amongst the key causes of an embarrassing inequality, one of the worst in Europe. Then, to complicate the solutions, comes the problem of the high public deficit, which has increased over the last decade as an inevitable inevitability. A debt aggravated by its dependence on external financing with a bias towards instability. And at the heart of this debt is the chronic deficit accumulated over the last decade in the pension system, which widens its deficit every year.

The Spanish pension system works well, is efficient, even generous compared to other systems. It is essential to mitigate inequalities. But pensions are at the centre of the debate on the stability and sustainability of Spanish finances in the euro area. That is why European partners are concerned and are calling for intelligent and urgent reforms. Minister Escrivá’s speech in Brussels is credible, it sounds solvent; but he has to move on from muses to theatre, to action. And this step is complicated because it comes up against seemingly insurmountable obstacles and interests.

The minister is proposing a reform that Professor Elisa Chuliá describes as a “piecemeal reform” that reminds me of the so-called silent reform the landowner Flores de Lemus called for in the early 20th century for Spain. ((Chuliá’s recent work for the Círculo Cívico de Opinión, which we publish as a report in this issue, can be seen in full on the Círculo’s website)

This silent reform never materialised because the Spanish aristocracy and bourgeoisie, selfish and blind, prevented it, considering that paying taxes was a “disastrous obsession” of liberals and socialists. Now it is the trade unions and other interest and ideological groups putting the brakes on the reform of a pension system that can be sustainable and viable if it undertakes the necessary reforms. If it fails to do so, we will be heading for a crisis with serious social consequences.

The pensions minister, despite enjoying the backing of Brussels and Prime Minister Sánchez, is not being as forceful, clear and convincing as we would expect him to be. The granular and parametric reforms he hints at are fine, necessary and desirable. But a piecemeal reform can produce the same frustration as the silent reform of Flores de Lemus.

Not reforming the system is to condemn it to failure, which would be historic and fatal. Europe is not in a position today to impose non-negotiable reforms. But arousing its mistrust would have a high cost for Spanish society. And precisely when we most need the solidarity of partners determined to provide support for the sake of convergence in a common project.

The pensions piece is essential, its reform is urgent in order to sustain a system that has been proven to work. The current minister is familiar with the issue, he knows what needs to be reformed. However, he has not taken the decision to assume his responsibility at a critical moment, when the system can still be sustained. The proposals of the Toledo Pact are overdue, ten years behind schedule and manifestly insufficient. And entrusting sustainability to annual transfers from the State Budget is too risky; bread for today and hunger for tomorrow.

About the Author

Fernando Gonzalez Urbaneja
Over 30 years working in economic journalism. Fernando was founder and chief-editor at El País, general editor at the business daily Cinco Días, and now teaches at Universidad Carlos III. He's been president of the Madrid Press Association and the Spanish Federation of Press Associations. He's also member of the Spanish press complaints commission.