Trimming the Social Security deficit

For the second consecutive year the national social security system has not budgeted for a deficit. The reality is that the system is already in the red because contributions from Spanish workers are not covering what the system has to draw on to pay pensions to retired workers. The problem is serious even though the government has been slow to admit it.

The system finished 2012 with a deficit of 10.132 billion euros, which was nearly one percentage point of the nation's GDP. And in 2013, the budget imbalance will be greater still. The Ministry of Finance hopes that the European Commission will extend by two or three years the time frame it has granted Spain to meet a goal that seems hard to reach: securing a 3% deficit/GDP ratio. It seems like meeting this goal would help the social security system balance its budget without increasing cutbacks elsewhere in government-run programs. But this is an error, a self-deceiving conclusion. The social security system still needs to hunker down and find a way to save money.