Employment Minister, Fátima Bañez. EFE
Spanish pensions will not be adjusted for inflation in an attempt to achieve budget deficit targets, it was announced last Friday.
Typically, the government makes an end-of-year review to bring future pension payments in line with rising living costs, with November’s inflation rate used as the yardstick. Then, usually, half the adjustment is paid in January or February with the remainder throughout the rest of the year.
This year, however, Madrid will instead raise pensions between one and two per cent in 2013. Those who receive less than 1,000 euros a month are the ones who will secure the maximum two per cent increase. The average Spanish pension, according to data from the National Institute of Statistics, is 950 euros a month.
The move, which will save 3.86 billion euros and keep the EU-agreed deficit goal within reach, will affect an estimated nine million retirees in Spain.
“It has been a very difficult and painful decision as it was the last thing we wanted to do,” said Employment Minister, Fátima Bañez. “But we had no choice.”
The European Union gave Spain a 100 billion euro lifeline in return for a promise to cut its budget deficit from nine per cent of GDP in 2011 to 6.3 per cent by the end of this year.
Capping pensions is an embarrassing u-turn for Mariano Rajoy’s centre-right government which made an election pledge to ring-fence them, although in recent weeks there have been hints that it might have to do an ‘about-face’ on that vow.
Pensions have been the last benefit to be hit by a series of coffer-bolstering measures, fuelled by mounting pressure from the EU and the financial markets, which have included increasing IVA (VAT) and income tax, and cutting public sector pay and unemployment benefits.
Friday’s decision is, according to many retirees questioned by SUR in English, likely to have far-reaching, negative implications as many older people are now helping to support jobless family members.
Mijas resident, Pilar Fernández Fernández, a former teacher, comments: “Like many pensioners, I now have to give money each month to my son and daughter-in-law, who are both unemployed, so that they can look after their son.
“Of course, I don’t mind doing this, but it leaves me very little to live on myself, which means I can’t afford to go out very much nowadays. This, I suppose, will impact on other local businesses as their revenues will be down as older people have a lower purchasing power.”
A survey carried out by independent research firm Simple Lógica confirms that more than 40 per cent of over-65s in Spain are now financially supporting family members, an increase of 25 per cent on 2010.