SPAIN - The new Spanish government of José Luis Rodriguez Zapatero (pictured) will face pressure to acknowledge the future deficits of the public pension system.
Zapatero’s socialist party (the PSOE) defeated the ruling People’s Party of José-Maria Aznar in the general election on March 14 which was overshadowed by the terrorist attack on Madrid.
The People’s Party had insisted that the pension system is sustainable but faced calls for further reforms from within the European Commission and the OECD.
The European Commission welcomed the most recent round of pension reforms. However, Pedro Solbes, the EU commissioner for economic and monetary affairs, told El Mundo, the Spanish daily, that in the long run the Spanish government would need to undertake “a wholesale reform of the pension system.”
The People’s Party position has been set out by Jesus Merino Delgado, a member of parliament and chairman of the committee responsible for negotiating the Pact of Toledo, the cross-party agreement which drives Spanish pension reform. Delgado has insisted that the current system remains solvent. “If we can sustain the current rate of growth and the ratio of two workers for every pensioner then the system will be fine,” he said.
However, Monika Queisser, a pensions expert with the Organisation for Economic Cooperation and Development, questioned whether this premise was realistic. “It’s difficult to see how the dependency ratio can be maintained given Spain’s ageing population,” she said.
Under the current system, some workers can retire on nearly 90% of salary. The generosity of the public system has prevented the development of private provision. By the end of 2003 fewer than 700,000 people were contributing to occupational schemes. It is unlikely that PSOE will be willing to reduce state benefits for pensioners.
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