Bank of Spain warns pension system needs more regulation

This is just one of the observations that the Bank of Spain has included in its report. annual reportThe 300-page publication published this Wednesday underscores the tremendous uncertainty of the supervisory body, beyond concerns about the sustainability of public finances in general and the pension system in particular, ukraine war contributed to the economic recovery and its harmful effects. inflation on the income of families and companies and the growth of activity. In the presentation of the report, Pablo Hernández de Cos, Governor of the Bank of Spain, calls for the building of “great political and social reconciliation” to provide an economic policy response to these challenges. “The uncertainties created by the war in Ukraine and resulting from the pandemic and which still remain – two absolutely extraordinary events – demand it.”

New expectations in June

The uncertainty is such that after depreciating growth forecast For this year of the Spanish economy (from an estimated 5.1% in December to 4.5% in April), a new discount has already been announced, with perspectives the body will release in June, according to the agency’s managing director for Economics and Statistics, angel hawk, without wanting to specify whether the new projection will match the latest estimate of 4.3% formulated by the Government, or closer to the 4% estimated by the European Commission. The source of this downward correction is the ‘dirt’ of GDP growth in the first quarter. The Bank of Spain had forecast a quarterly growth of 0.9%, with INE data leaving only 0.3%.

The new outlook will also re-examine the Bank of Spain’s latest forecast. inflation (in April this year it was estimated as 7% on average). On the one hand, the body is intent on incorporating innovations that have something to do with something bigger. Core inflation (Inflation reached 4.4% in April without more volatile energy and unprocessed food prices) and there was concern that prices would rise more permanently over time as a result. The new research also aims to include the predictable impact of easing the electricity bill after the government-adopted cap on gas price.

Salaries and benefits

There is consensus in the forecasts of all organizations that inflation will approach a radically moderate 2% in 2023. In any case, the head of the Bank of Spain insists that social actors must come to an income agreement so that employers and workers equally share the poverty caused by inflation imported from abroad through the energy bill, food and raw materials.

Employers and unions abandoned negotiating a deal. State Collective Bargaining Agreement (AENC) for the period 2022-2024, where it is intended to crystallize such a revenue agreement. But from the Bank of Spain’s point of view, there are signs that such a revenue deal is “tacitly fulfilled”. On the one hand, collective bargaining data show the loss of purchasing power of wages (until April, wages agreed between employers and unions had increased by an average of 2.4%). On the other hand, Bank of Spain Business Activities Survey (EBAE) estimates that after receiving a 4.5% cut in margins in the fourth quarter of 2021 (according to data from Central statistics), “companies will not pass on all the increase in costs to their prices”. Balance).

Limit the increase in pensions

Bank of Spain raises include pensions in the income contract should serve to distribute the costs of inflation resulting from the energy crisis. In this sense, it is recommended to “guarantee the purchasing power for those who receive a minimum pension”, but it is warned that expanding this practice – as established by the Social Security reform – to the entire group “necessarily necessitates this also by other actors of the national economy” and recipients of capital income) must bear a larger portion of these costs”. Currently, the Government projects an increase in pensions of about 6% in 2023, in line with the estimated average inflation for 2022.

Guaranteed purchasing power of pensions and repeal of the sustainability factor The legacy of the PP is part of the first reforms already adopted by the Government. Measures have been taken for this Bringing the effective retirement age closer to the legal age. The second part of the pension system reform envisages a series of additional actions that should be noted during this year. measures such as development are some of them. employment retirement plans, review maximum contribution guidelines and maximum pension, a new contribution system self employed and a review the time taken into account to calculate the regulatory base pension.

Beyond these reforms, the Bank of Spain considers that new actions “on the revenue side” will be necessary in the future. [cotizaciones sociales]expenses [prestaciones] or both” to ensure the sustainability of the system. In this sense, for example “strengthen the link between contributions made and benefits receivedprovide an adequate level for the most vulnerable households” while also “starting a vigorous discussion” addressing: the level of benefit the system should provide and the strategy for generating the revenue necessary to finance them.