Increased unemployment in Spain is threatening to bankrupt the country's social security system, and rising national spending on unemployment is also expanding state debt. Since the crisis began, the social security system has lost nearly 2.5 billion contributors. In the last year alone, 600,000 people have stopped paying in to the system.
Social Security, unlike the rest of Spain's public administrations, carried a surplus up until 2010 and registered a 550-million deficit in 2011. It?s free from debt and, further, has money in the bank: the Prevention Fund (5 billion) and the Reserve Fund (nearly 68 billion). Still, with unemployment worsening, the system's overall good health is on the verge of collapse. In 2007 there were 2.7 workers contributing to social security for every one person drawing a pension. Now there are only 2.4. The ideal, sustainable number would be 2.5.
The situation affection the social security system's accounts is changing so dramatically and at such speed that in June it had to take funds from the Prevention Fund, which it has practically exhausted, in order to make pension payments. The Ministry of Employment needs to explain how they sold the debt that was invested in this fund. If it was sold on the secondary market, that debt could have dropped in value, which is really bad news.
Maximum transparency is necessary in order to avoid further harm to the system, because people are starting to doubt seriously how December pension bonuses will be paid. And it's possible that the social security system will have no other option but to ask the state for a loan. Freezing pensions is an unpopular move, but worse is not having money to pay them at all. The government was wrong to not freeze payments, and now it might have to lower them.
