Next year pensions will increase by 8.5% to keep pace with inflation, which means that benefits will rise much more than the economy itself, both the Spanish one in general and the Asturian one in particular. Forecasts for the Principality indicate that regional activity will grow by 0.7%, which means that GDP will reach 22,446 million euros, that is, 156 million more than this year. However, the advance inflation data for November (6.8%), which the National Statistics Institute (INE) published provisionally last Tuesday, indicates that from January contributory pensions will increase by almost 8, 5%, as estimated by the Government in the 2023 Budget. This means that the total cost of benefits in Asturias will be 5,828 million euros, an increase of 466 million compared to 2022. Therefore, the outlay on pensions it will be almost three times greater, in absolute terms, than the growth of the regional GDP.
The revaluation of the contributory pensions will be confirmed on the 14th, when the official inflation data for November is published, given that the percentage increase results from calculating the CPI average between December 2021 and November 2022, as established in the first part of the pension reform approved last year. According to the provisional data, the benefits would grow by 8.458%, a figure that almost coincides with what was foreseen by the Government.
Of course, this comparison between pension spending and the evolution of the economy can be transferred to the national level. The Executive calculates that next year the Spanish GDP will grow by 2.1%, but most of the main public and private macroeconomic analysis organizations estimate a much smaller advance, around half. Thus, for example, the European Commission places it at 1%; the International Monetary Fund (IMF) at 1.2%; the OECD, at 1.3%; and the Savings Banks Foundation (Funcas) lowers it to 0.7%.
Assuming the government forecasts for this year and the next (in the latter case it is the most optimistic of those being considered), the GDP for the next year would be estimated at 1,286,401 million euros, which means 26,458 million more than in 2022. And with the revaluation of 8.5%, the national disbursement in pensions would be 185,687 million euros, an increase of 14,547 million. In other words, the increase in benefits would absorb more than half (55%) of the general growth of the economy. Of course, that correlation will be much worse if any of the other, much less favorable estimates hold. In the event that Funcas were right, the GDP would only advance by 8,819 million, so the relationship would be reversed: that wealth creation would cover only 60% of the increase in pensions.
It should be remembered that not all Spaniards will pay equally for the huge pension deficit (the difference between Social Security income and expenses), which in 2023 will exceed 38,000 million euros. This hole will be covered by taxpayers through a contribution that the national government has incorporated into the 2023 Budget. However, despite the fact that the pensions come out of the State’s common fund, the Basque Country will not support this disbursement proportionally. After negotiating with the Executive, the PNV has achieved that the quota (the contribution that the Basque Administration makes to the central State for non-transferred services) is 1,472 million euros per year until 2026 (it is negotiated every five years), a figure slightly higher than that of the last quota (1,403 million last year), so it does not include the increase that the Basque Country should make to help pay for the very large pension spending throughout the country, which this year will amount to 171,140 million euros, according to the forecasts of the national Executive.
Brussels warns Spain that the funds can be suspended if the system is unsustainable
The European Commission has warned Spain that European pension funds “can be suspended” if the public benefit system is no longer fiscally sustainable. The Commissioner for the Economy, Paolo Gentiloni, has indicated that “if it is considered that not all the milestones and objectives associated with a section have been satisfactorily met, [la Comisión] will partially suspend the payment”, according to Servimedia. Gentiloni made the warning this week in a written response to a question from the Citizens (Cs) MEP Eva Poptcheva about the measures that the Community Executive will adopt if the reform approved by the Cabinet of Pedro Sanchez does not meet the intergenerational equity and sustainability requirements demanded by the executive of the Union. Last June, Brussels approved the second payment of funds to Spain for a value of 12,000 million, although it expressed its concern about the fiscal sustainability of the entire package of measures, including the intergenerational equity mechanism. In his parliamentary response, Gentiloni recalled that in the evaluation he already warned that in order to respect the general objective of fiscal sustainability, it would be necessary to address “the risk of a significant budget deviation derived from the measures adopted and also take it into account in the design of other reforms slopes”. Now, with a view to the next payment, the commissioner assures that “satisfactory compliance” with the measures will be analyzed, “including the long-term fiscal sustainability of the pension reforms undertaken in 2021 and 2022.” However, the Italian leader points out that the Commission “cannot speculate on the result of this evaluation.”