Spain’s pension system will generate 36.5 billion euros ($50 billion) of losses by the end of 2016, adding to the stress on public finances, Labor Minister Fatima Banez said today.
The social-security system has lost 3.2 million contributors since 2007 and has been running an annual deficit since 2010, Banez told the parliamentary pensions committee in Madrid. The system’s reserve funds are set to cover 23.6 billion euros of losses for 2012 and 2013, she said.
Prime Minister Mariano Rajoy is trying to limit liabilities to retirees by establishing a link between benefits and revenue in the pension system after being forced to bail out the banking system last year. The government may also be on the hook to rescue a network of privately owned highways around Madrid and has twice been forced to put up money to cover losses in the electricity system.
The pension-reserve fund was set up to provide a buffer to cover the effects of the ageing population and the Rajoy has used it to fund higher pensions as the number of contributors paying in slumped. The fund holds 59 billion euros at present and will pay out 6.1 billion euros by the of this year to cover payments to retirees, Banez said.
The number of pensioners is increasing at 100,000 per year and Spain will have 9 million fewer people of working age to support retirees by 2050, Banez said. By then, 30 percent of the population will be over 50.
Banez presented the draft pension reform law to Parliament today.