It should be noted that the Reserve Fund has been depleted , going from a positive balance of almost 50 billion euros in 2014 to being practically non-existent since 2019.
The images speak for themselves. In 2023, the cumulative transfers from the State to Social Security, transfers by passive classes and accumulated debt reached more than 350 billion euros. A historic figure that, if not intervened, will continue to increase year after year.
The situation: in detail
Since 2017, the EU has required all member states to publish the accrued value of their pension liabilities, i.e. what the State owes to pensioners and contributors. Thus, at the end of 2021, the liabilities of the public pension system were equivalent to 4.72 times the national GDP , i.e. 5.76 trillion euros.
The public pension system is in a huge financial hole . It is 1.30 times the GDP of 2021, about 1.58 trillion euros, since the value of the financial assets from contributions attributable to the system was 3.42 times the GDP in 2021 (4.18 trillion euros). The liabilities were 5.76 trillion euros (4.72 times the GDP).
In the last four years, according to data from the Bank of Spain, Social Security has doubled its public debt and has gone from a liability of 55 billion in 2020 to exceeding 116 billion euros in 2023 .
All of this shows that, since the beginning of the last decade, the system has been in full deficit and that an ever-growing debt ball is forming in the face of current transfers.
This is how Social Security has closed 2023 with an increase in debt of 10 billion euros (9.4% more in the year-on-year comparison). This is as a consequence of the loans granted by the State to the General Treasury of Social Security , thus managing to finance its budgetary imbalance.
And now what?
As of February 2024, expenditure on contributory pensions stands at 11.5% of GDP . If all state contributions to the public pension system were eliminated, the Spanish economy would require sustained economic growth of 3.20% annual real cumulative growth in the long term .
An unattainable goal if we take into account the average GDP growth in recent years, which has been barely 1.88% in real terms. Without an increase in economic growth or without deep adjustments in the system, the imbalance between assets and liabilities will worsen .
If this trend continues, public debt would be 2.46 times GDP (3.01 trillion euros) . This could put Spain's borrowing capacity at risk in the future and create a situation similar to that experienced in Greece in 2008, when maximum pensions fell by 50% and minimum pensions by 25%.
For experts, the government's latest reform will not curb the tax deficit of recent years . Solvency is completely deteriorated, the projections are implausible and are based on demographic and macroeconomic assumptions and the result would be an increase in the public deficit of 1.1% in 2050 and another 1% in 2070 , raising public debt to 186% of GDP.
The Social Security system is in a critical situation and in full decline . If it is not controlled, intergenerational equity will not improve, the tax burden on the new generations will increase and the gap will grow.
Growth supports debt . The Ministry of Economy believes that by reducing at a good pace the maximum debt/GDP ratio reached during the pandemic, thanks to GDP growth at current prices, the system can be improved. This reduction is compatible with the adoption and maintenance of support measures for families and businesses.