When Spain burns through her pension reserve fund

This is an interesting blog by an economics author in Catalonia. fistfulofeuros.net/afoe/why-is-s … c-problem/

Summary: Spain is spending a lot more on pensions than are being pumped into the pension fund. President Rajoy has been raiding the reserve fund to pay for this.

Rajoy has clung hard to Merkel’s austerity policy and supports Berlin in Eurogroup meetings to pressure Athens. In return Berlin turns a blind eye to obviously unsustainable spending on Rajoy’s voter base: retirees who grew up under Franco and who mourn his passing. The latter half of the dictatorship was a time of catch-up economic growth like the tiger years in Ireland.

Regardless of whether you think Franco was a godsend for Spain or not, the next government will have to choose between angering pensioners or angering austerians at some point during its term.

The pension fund at present means the issue isn’t forced. But when it is, Spain’s membership of the Euro might very well suddenly be up for debate. Retirees vote in huge numbers and won’t easily let go of their goodies.

Raiding a state pension fund should be a criminal offence.
Even Bertie, Brian & Brian would never have done such a … ohhh …

Using a pension fund to actually pay pensions wouldn’t be as bad though…

An interesting point about Spain’s predicament is that they are obliged to increase the pension payout every year by a specific percentage. Spain is in deflation now so in real terms, that’s an extra burden on the reserve fund.

30/40bn isn’t a lot in a country of 40million either. Joan burton or sinn fein could chomp through that lot here in jig time.