• The Minister of Employment, Fátima Báñez, has announced that the payment of 9,500 million euros for the summer extra will come from two sources.
  • On the one hand, 5,986 million will be used from the loan that was granted through the General Budgets for Social Security.
  • The remaining 3,514 euros will come from the Reserve Fund, the so-called pension fund, to which a new pinch is added again.
  • IN FUND: The pension system, forced to change with the increase in life expectancy.
  • ARSENIO SCHOOL BLOG: “The problem of financing pensions is first of mathematics”.

The pensioners will charge this summer, as always, their extra payroll. But this time the money will not come exclusively from the coffers of General Treasury of the Social Security. The Government is going to pull for the first time the line of credit of 10.192 million that was granted to the agency to deal with pension payments in the face of scarce resources.

The Minister of Employment, Fátima Báñez, announced today after the Council of Ministers that the payment of 9,500 million for the summer extra will come from two sources: on the one hand, 5,986 million from the aforementioned loan will be used; and the remaining 3,514 will come from the reserve fund – the so-called pension fund – to which a new pinch is added. The loan has been activated after the approval of the 2017 budgets and their use, says the Ministry of Employment “seeks to maintain the reserves of the Fund without having to divest assets”- BridgePayday.

After the payments of December 2016 – for the monthly payroll, the extra Christmas and the IRPF pensioners – the moneybox was left with 15.148 million, an amount that barely gave this year to pay for the extraordinary summer and part of the winter. Hence, the Government has granted a “zero-rate” loan with a charge to Budgets to supplement the little cushion left to the Fund.

The general payment in July (payroll, extra and IRPF) will be of 17,218 million. With the 3,514 that will be taken out of the piggy bank, the fund keeps 11,602 million. An amount that would be enough to face the next extra Christmas, although surely the Government will pay for it in a shared way with the loan (4.206 million) of which is already less than half after the first and only repayment.

“The Government sinks more pensions, now in debt” 

"The Government sinks more pensions, now in debt" Loan

Báñez has admitted that the Executive had to find mechanisms to cover the “temporary deficit” of the system, while employment alone is not enough. And it is that the problem of Social Security is that it does not enter by enough contributions to assume all the benefits. The money arrives for the normal payroll, but the extras have had to be paid in recent times with the famous moneybox, a mattress that was generated during years in anticipation of lean times and that reached 66,815 million in 2011, the year in which Rajoy came to power.

From that moment, the piggy bank was progressively thinning. The low salaries, the precariousness of the employment and the bonuses to the hiring cause that they are not generated sufficient income to pay the 9.5 million benefits. Spending also breaks records every month for two reasons: one, the aging of the population and, second, that new retirees enter the system charging a higher pension than outgoing ones.

For all this Social Security showed last year the biggest hole in its history (18.096 million euros) that was covered by the hand of the piggy bank. This 2017 will not change the thing much: the imbalance, according to the Executive, will be reduced to 16.650 million (1.4% of GDP). That is to say, the expenses of the system will again exceed the income and it will be necessary to pull the piggy bank and the loan approved on Thursday. The Government, in fact, expects successive deficits until the year 2020, when there would still be a hole of -0.5% of GDP.

“The Government contributes to sinking a little more pensions by way of indebtedness”, has complained UGT to know that Social Security will pull the loan to pay benefits. A money that must be returned after 2018 and within a maximum period of 10 years. The union asks the Executive to “get out of immobility,” finance the 16,000 million in subsidies from budgets and increase resources in 2018 to avoid “continuing to condemn pensioners to poverty.”