The Independent Fiscal Responsibility Authority (Airef) warned yesterday that the pension reform in force will cause an increase in the deficit and debt in the coming years if no new corrective measures are taken to increase income or curb spending. The body chaired by Cristina Herrero warned, through a comprehensive opinion on the aging of the population and the sustainability of public finances, that the changes implemented are not sufficient, since the increase in income does not compensate for the greater expense.
According to the scenario drawn up by the supervisory body, the current pension reform will have an impact on the deficit of 1.1 points of GDP in 2050. Specifically, expenses will grow over the next 27 years by 2.4 points, and the most notable item will be the revaluation of benefits in accordance with the IPC, a measure agreed in the Toledo Pact and which will cause 2.7 points more expenditure. In addition, the elimination of the sustainability factor will raise the same expenditure item by 8 tenths. On the income side, Airef calculates that the approved reform will lead to an increase in income of 1.3 points of GDP in 2050. 20 years later, the deficit will increase by one point of GDP.
The independent body predicts that, if no new decisions are adopted in this period, expenditure on pensions will grow progressively to 16.2% of GDP in 2050. This will be the peak. In 2070, however, it will fall to 13.9% due to demographic changes.
Airef also warned of the “high debt” problem, which will increase in the coming years due to the greater aging expenditure. Specifically, the body’s opinion points out that by 2050 the share of Health will rise to 8.4% of GDP and that of dependency will already be 1.7%, surpassing that of unemployment. All this would cause a constant increase in the debt ratio. The decade of the thirties would mark a turning point and give way to an upward path until reaching 147% of GDP in 2050 and 186% in 2070.
The main conclusion of the Airef was, therefore, that the pension reform is insufficient to cover expenses and that it will be necessary to act more forcefully to comply with the sustainability of public finances when the fiscal rules are restored.
In this regard, President Herrero asked for speed “to have an idea of ??the adjustment we have to make”. He emphasized “the importance of acting as soon as possible, since the sooner we act, the smaller the adjustment that will need to be made”.
The Minister of Inclusion and Social Security, José Luis Escrivá, criticized the opinion of the Airef, where he worked before arriving in the Government, for including “several outdated scenarios”. The body has not included the effects of the labor reform, productivity growth and the boost of European funds, emphasized the person responsible for the reform. He also assured that “the part of recommendations seems perfect to me”.
The independent authority has the mission of monitoring measures aimed at increasing revenues, a matter that Cristina Herrero also criticized because it was not given the mandate to also analyze expenses. Airef reported that it sent its document to the Government’s economic area and received “allegations or clarifications” that it incorporated into the final report. “We have no complaints, we have received all the information”, he remarked.
