Spanish government reaches preliminary pension reform deal with unions and employers

The Spanish government has reached a preliminary agreement with trade unions and employers’ associations to reform the pension system, according to cabinet and union sources. 

The deal includes reevaluating pensions in conjunction with changes in the consumer price index, the ‘IPC’, to maintain purchasing power. A repeal of the sustainability factor has also been agreed upon and will be substituted by an intergenerational equity mechanism, which has yet to be defined. 

The sustainability factor was a unilateral reform approved by the right-wing People’s Party in 2013. It consists of a complex formula that links future initial pensions to life expectancy, which may lead to the reductions of pensions by the next years. 

Moreover, the Spanish government will commit to a 2% transfer of GDP to Social Security through the general state budgets, guaranteeing the Spanish public pension system. The agreement also includes measures about the early retirement model with the introduction of penalties. 

The reform should begin to be implemented by early 2022 and is aimed to last 25 years according to José Luis Escrivá, the minister of Inclusion, Social Security and Migration. 

European funds 

The European Commission gave the green light to Spain’s Covid recovery plan, which will give access to €69.5bn of European funds in the form of grants. 

In their evaluation, the EU executive confirmed that Spain’s plan meets the minimum objectives for the ecological and digital transition, and all 11 criteria necessary for approval. 

Some 40% of the money will go towards the ecological transition, and 28% will go towards the digital transition. Moreover, the European Commission endorsed the labor and pension reforms.