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Spain taps into Reserves to pay for Social Security Obligations
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Reserves will disappear in 2017 if no solution is found to the deficit. The government of Spain had to resort to its reserves to pay for Social Security and pensions for the month of July. It had to take 8,7 billion euros from the Reserve Fund, the largest one-time withdrawal to date. Following this transaction, there are only 25,17 billion euros saved, the equivalent to 2.33% of GDP. At this rate, the so-called piggy bank of pension will disappear by the end of 2017. The move to find resources for the broken pensions system is the highlight of the lack of funding of the pension system that underlines what will be one of the first problems that will have to be dealt with by the new government. Come summer, the treasury of the Social Security faces one of its two annual challenges: disbursing its monthly payroll for July, the summer bonus and the settlement of income tax. It’s been 4 years since the first time that the contributions proved to be insufficient to meet the payments, so the Social Security Administration has to resort to the resources saved in good times in the Reserve Fund. This time, the withdrawal of 8.7 billion, according to the Ministry of Employment, exceeds that of December 2013, when the institution also needed 8 billion euros to pay its obligations. The way in which the budget was used during the first half of 2016 was a preview of the need tat the Treasury of the Social Security System would have to use money from its reserves, which ended up being higher than last year. In July 2015, there was a deficit of 6.5 billion, which the Treasury obtained through two channels. One of them was the Reserve Fund, which surrendered 3.7 billion. Since 2012, the gap between income from contributions for Social Security and pension spending has caused the creation of a deficit of 54,1 billion euros which has been taken from the Reserve Fund. According to some calculations, the payment of contributory pensions throughout this period amounted to 62,581 billion euros. If measured at market price, the amount saved has reached 27,49 billion. However, at face value the money remaining in the Reserve Fund amounts to 25,1 billion euros, equivalent to 2.33% of gross domestic product. This amount is far from the 67 billion that the Reserve Fund had at the end of 2011.
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