SPAIN - The IMF has urged the new Spanish government to place pension reform high on its policy agenda.
The IMF said that to get pensions on a sustainable long-term footing, the recently renewed tripartite commission (Pacto de Toledo) which provided a useful framework should be translated into a specific set of measures.
These measures should be centred on gradually raising the effective retirement age, via stronger incentives to forego early retirement, and on strengthening the link between contributions and benefits, reviving an earlier proposal to raise the period used to compute the pensionable base salary from 15 years to an entire working life.
While welcoming the reduction in public sector debt and the strengthening of the social security reserve fund, the organisation stressed that long-term fiscal sustainability will also need to be supported by comprehensive pension reform.
The IMF pointed out that following initial steps in 1997, progress on pension reform in the context of the relevant tripartite commission had stalled.
While a medium-term fiscal surplus appears at hand, comprehensive pension reform – the other element required to ensure long-term sustainability – has continued to be postponed, according to an IMF statement.
It was also stated that although Spain’s demographic shock occurred later than elsewhere in Europe, it was relatively more pronounced, with age-related expenditure increasing roughly 60% more than the EU average, excluding Spain.
The IMF stressed that net debt reduction was not a substitute for pension reform, which needed to regain momentum in the next legislature.
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