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Spain's parliament approves revenue-focused pensions overhaul

Published 03/30/2023, 10:28 AM
Updated 03/30/2023, 10:31 AM
© Reuters. Pensioners walk along a street in Ronda, Spain, March 30, 2023. REUTERS/Jon Nazca

MADRID (Reuters) - Spain's parliament on Thursday endorsed government-proposed changes to the pension system that increase contributions for nearly 11 million pensioners, putting most of the additional cost on the country's highest earners and their employers.

In contrast with France, where fierce, cross-sectoral protests have raged for weeks over the government's push to extend the retirement age by two years to 64 and cut some benefits, the Spanish plan focuses on increasing revenues through tax hikes.

Social Security Minister Jose Luis Escriva said the reform was "for the country's social majority" and described pensions as "the most important pillar of the welfare state" as he urged lawmakers to pass it.

The bill sailed through the lower house by 179-104 votes, with abstentions.

The overhaul, a key requirement by Brussels for Spain to obtain a new tranche of European post-pandemic recovery funds, had sparked a four-month debate within the government as it sought to find a way to hike revenues without penalising future pensioners.

Revenues are expected to increase by 15 billion euros ($16 billion) a year, representing a rise of three percentage points of gross domestic product by 2050 and reducing to 15.5% of GDP the burden of pension payments on the budget.

The reform is opposed by the conservatives opposition and the main business group CEOE, who argue it will increase labour costs, endangering job creation, and reduce workers' wages.

But the leftist coalition government has said the changes, backed by the unions, will provide stability for a pension system under pressure with one of Europe's largest ageing populations.

© Reuters. Pensioners walk along a street in Ronda, Spain, March 30, 2023. REUTERS/Jon Nazca

Spain carried out a major pension reform in 2011 when it raised the retirement age to 67 but that proved insufficient to offset the high costs of the system, which has come under pressure from measures such as the raising of pension payouts in line with inflation.

($1 = 0.9383 euros)

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