The government is resuming pension reforms after Rajoy put them on hold several weeks ago. Yesterday, Employment Minister Fátima Báñez announced that her program would be put in front of Congress before September. The social security system?s budget data show that if measures are not taken, the executive will have to keep dipping into its reserve fund in order to make up for low revenues from social security contributions.
This reserve fund was used for the first time in 2012, when the government took 7 billion euros to help pay for pensions. This year 3.5 billion has been used and it?s likely that more will be taken out. A committee of experts that was selected to reform the social security system has warned in a report that if legislative changes are not made then the entire reserve fund could be exhausted by 2019.
Báñez says that he will follow the committee?s advice and will develop the so-called ?sustainability factor.? That means cutting current and future pension payments so that the system can stay sustainable. Trying to obscure the truth and keeping the public in the dark about its decisions makes the government look bad. Social security contributions are weak because fewer people have jobs and those who do are often earning lower salaries, both factors contributing to lower overal revenues for the system. And this trend will not change even when employment figures start to improve, because salaries will remain low.
Creating the sustainability factor is not an urgent issue, and at this point maybe it would be best to commit to a more sweeping social security system reform. But time is ticking. Congressional meetings on this new reform are not going to be easy, and they will have to content with the possibility of a major failure. Still, the biggest risk for the system?s survival is complete inaction. For this reason, the Employment Ministry should finish its bill as soon as possible.
