Social Security Minister José Luis Escrivá left the third and final phase of his plan for the legislature to expire. reforming the pension systemfully included most disliked aspects your measures. Three key milestones remain to be met: calculation period raise pensions, highest salary offer and presenting to Brussels convincing figures assuring that the reforms approved since 2021 will guarantee the Social Security balance by the horizon of 2050 after the PP government repeals the pension cuts reform. Mariano Rajoy. If the Government cannot convince Brussels of this, the Government may face a penalty. up to 2.5 billion In the form of a lower distribution of European funds, according to its own calculations, verified by experts of the European Union Recovery Mechanism. HE Minister Escriva insists that the penalty assumption will not come true, as he will manage to solve the puzzle. “We will not violate Brussels or the Recovery Plan,” he said again in Barcelona this Thursday. This European Commissionso far, it has not confirmed the minister’s most optimistic calculations.
How to compensate for a 50,000 million hole
According to calculations submitted to the European Commission by Minister José Luis Escrivá, Reform by PP cutting pensions obliges the Government to adopt reforms that balance 3.7 percentage points of GDP (about 50,000 million today) that would allow these measures to save by 2050. Increase in pensions with CPI It will add 1.4 points to spending in 2030 and 2.7 points in 2050 (about 36,000 million today). Also, remove Sustainability Factor Another PP-designed GDP adds a higher spending score (about 13,300 million today).
Extend the real retirement age: Up to 1.6% of GDP in savings?
Among the measures taken by the government to make up for the 3.7 percentage point deficit in GDP in 2050 as it eliminated PP cuts, voluntary delay in retirement age. The aim is that the actual average retirement age is closer to the legal retirement age of 67. According to this Forecasts sent to Brussels by Escrivá, this measure will save between 0.2 and 0.4 points of GDP in 2030 and between 1.1 and 1.6 points in 2050. However, the European Commission services consider that savings will remain at the lower end of the forks.
New Capital Mechanism: Income per 1 point of GDP?
The government also gave Brussels, Sustainability Factor The PP (which reduces the amount of pensions as life expectancy increases) and replaces it with the new Intergenerational Equality Mechanism (the MEI with a 0.6 point surcharge on social contribution) a neutral effect in accounts. In other words, the MEI will compensate the estimated savings of one percentage point of GDP for the Sustainability Factor. The European Commission is wary of this calculation, arguing that removing the sustainability factor “is likely to result in a substantial increase in public spending as a percentage of GDP over time”. The government has already agreed. extend to 2050 The mechanism (from 2030 start date) tries to silence the European Commission’s suspicions.
New self-employment regime: 0.6 points of GDP more income?
This issue is particularly tricky. Minister Escrivá has on several occasions suggested that the system for adjusting the contribution of the self-employed to their real income natural in terms of collection. It doesn’t look like that described in Brussels. “Spanish authorities agree that the gradual transition to taxable income [ingresos reales] on a bid basis will increase total contributions to the system. In a preliminary report published by the European Commission on 17 February, the Commission services find these estimates reasonable to allow the third tranche of European funds to be paid to Spain. Although the tax-collection impact of the reform of the private self-employment regime is not documented and Minister Escrivá does not publicly acknowledge this, official sources estimate it to be 0.6 percentage points of GDP.
Extending the pension calculation period to 30 years: neutral effect?
Ministry of Social Security, its proposal increasing the retirement calculation period from 25 to 30 yearswith the possibility of being ignored.worst two years professional career will have a neutral effect on the collection. Despite the suspicion that this measure aroused among the unions, the internal accounts of these organizations seem to support the ministry’s medium-term accounts. While there are studies suggesting that extending the calculation period reduces the pension (for example, the Bank of Spain estimated that increasing the duration to 35 years would reduce the pension by 8.2%), the possibility of excluding the two worst years of computing can be useful in many situations. Escrivá insists that one in three retirees will win. When this is the case, this precaution political groups From the left of the Congress of Deputies, which refused to extend the calculation period. However, neutrality does not contribute to the improvement in the sustainability of the pension system that Brussels expects from the Spanish Government.
Higher contribution of maximum bases: 0.5pp higher income GDP?
The magic wand left by Minister Escrivá to get the highest income that will ensure the sustainability of the Social Security system without falling into pension cuts is based on maximum contribution bases. The ministry put it on the table to raise the current maximum contribution base (4,495.50 euros per month). 30% gradually over 30 years. This 30% will be in addition to the increase that may result from updating the contribution rates with the CPI. In response, the Government’s proposal includes increasing the maximum pension, albeit to a lesser extent (between 15% and 25%, as announced by EL PERIÓDICO, minister from the Princess Ibérica group). According to the government’s calculations, this measure, which has not yet been closed, could add half a point of GDP to the system’s revenue. Also, according to El País, Spain is from Brussels quote surcharge on an increased maximum basis.
Fourth payment of funds: will all 10,000 million come?
According to the reform calendar committed by Spain under the Plan of Recovery and Resilience, Spain should have completed it. its third round Completion of Social Security reform before 31 December 2022 three milestones waiting: extend the pension calculation period, raise the maximum contribution bases, and present a report with comprehensive calculations that ensure that all reforms since 2021 ensure the sustainability of the system. While Escrivá says agreements will be ready in the next few days, it has not yet been possible to complete this round of reforms – waiting to unify the necessary social, political and European agreement. Once these reforms are complete, Spain will be in a position to make demands. fourth payment Scheduled from European funds (third payment confirmed on 17 February). If Brussels finds compliance with the milestones satisfactory, it may authorize the new payment as follows: 10,000 million, full. Otherwise, this could penalize Spain with a smaller delivery on the fourth payment.
Possible penalty: up to 2.5 billion European funds at stake
On February 21, the European Commission published what its criteria would be when making partial payments for violations of certain milestones committed by countries in their Recovery Plans. The total amount of planned transfers (69,720 million in the Spanish example) should be divided by the total number of milestones and goals committed (415 in the Spanish plan). will result unit value (168 million for Spain). The penalty will be the result of the number of milestones not fulfilled multiplied by the unit value, but the document published by the European Commission states that the amount incurred in the case of unfulfilled reforms is, can be multiplied by 5, depending on relevance. Based on these rules, and taking into account that the European Commission has not yet evaluated the three milestones corresponding to the sustainability of the system, it can be concluded that a hypothetical penalty for Spain for non-compliance with these reforms could reach 2,500 million.