An unconvincing proposal

The precarious status of Mariano Rajoy's minority government was highlighted once again this week

Mark Nayler

Friday, 16 March 2018, 12:59

The precarious status of Mariano Rajoy's minority government was highlighted once again this week. In yet another attempt to pass the 2018 budget, the Spanish prime minister promised his opponents in congress that this year's spending plan could include tax breaks for widows as well as an increase in the minimum state pension. Displaying his peerless flair for elliptical soundbites, Rajoy announced on Wednesday that the changes are within the framework of this year's budget, although we can't spend more than we earn.

This enigmatic statement contains the essence of the conservative Popular Party's (PP) policy on Spanish pensions -namely, that the best way to increase them is by bolstering the country's workforce. In Spain, pensions are part of the social security system, so Rajoy's case is that continually upping pension rates is not possible if there is not enough money coming in at the other end of the system - i.e. from contributions to social security on behalf of the employed population.

And here lies a stumbling block. Although unemployment in Spain is much reduced from a critical high of 26% in 2013, it is still 17%, second only to Greece within the EU. The jobless rate amongst under-25s is even more of a problem and stands at 38%.

Further compounding the imbalance that exists between the extremities of the Spanish social security-pensions system is that Spain's elderly population is rapidly increasing: the World Bank predicts that by 2050, half of the country's population will be over 55 years of age. In other words, an insufficiently powerful workforce is being put under strain by an increasingly elderly population. That's why Rajoy says he's severely restrained when it comes to increasing pensions.

As complicated as the issue is, the Spanish PM's opponents say that he should be doing more. This year, for the fifth year in a row, pensions increased by 0.25%, not even matching an inflation rate that was at 1.1% last month. Indeed, Spanish pensioners, a cohort on whom the PP is heavily reliant for votes, are rapidly swelling the ranks of its detractors.

Rajoy's critics also point to his country's alleged economic recovery. Spain has enjoyed four straight years of GDP expansion - a steady growth that has withstood the election disaster of 2015-2016 and the ongoing Catalonia saga. So why is none of Spain's prosperity reflected in an improved pensions system?

Rajoy has only made these latest proposals because he needs support from other parties to pass the 2018 budget. Like an apology that's asked for and not volunteered, it's a policy change that feels singularly unconvincing.

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