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HomeLatest NewsEscrivá accelerates the pension reform to tie up the EU spring funds

Escrivá accelerates the pension reform to tie up the EU spring funds

Date: June 10, 2023 Time: 13:07:35

The Ministry of Inclusion, Social Security and Migrations hastens the last fringes of the second pension reform. A document that should have been submitted before December 31, 2022 to the European Commission, but on which there is still no formal agreement. As a result of this delay, some questions have arisen, such as whether the European Union will penalize Spain and withdraw the rest of the Next Generation funds, agreed in the Recovery, Transformation and Resilience Plan (PRTR). However, in the cabinet of José Luis Escrivá, not much importance is given to the fact that the deadline promised to the Commission has been exceeded, since his priority is that “this second part of the reform be based, like the first, on an agreement with the social agents”.

For this reason, the Ministry continues to negotiate with the unions and, above all, with the political forces this second construction of pensions. The talks are progressing well, and while the larger elements of the package generate enough consensus, there are additional aspects that are being finalized. This is an objective to be met with a view to reviewing the application for the fourth installment of European funds. Since, regarding the third disbursement, Spain has been the first country to request it, as well as to meet 29 milestones and objectives (23 milestones and 6 objectives) required.

This second phase of the pension reform is carried out, to a large extent, by the highest incomes. An increase in the maximum contribution bases is proposed so that the highest wages contribute more to Social Security, which entails a progressive increase in maximum pensions. At this time, the maximum contribution base stands at 4,139.40 euros, so all those who earned more than this figure contribute equally to Social Security. With the elimination of this cap gradually, the obtaining in terms of social contributions will take place. Plus, you’ll get the revenue from the system in the 1930s and 1940s, which is where the system will suffer.

What measures remain to be approved in the second pension reform?

Specifically, the differences between the parties and the disagreement were triggered by the proposal to extend the pension calculation period from 25 to 30 years, discarding the two worst years of contributions. From the outset, Unidas Podemos refuses to make any change that entails a loss of purchasing power for future pensioners, as it ensures that it will happen if the calculation period is extended. While the suggestion was not received well by the CCOO and UGT, since they understand that it was not an issue included in the Pact of Toledo nor does it enjoy sufficient political support for its implementation.

In addition, this second leg of the reform addresses the uncapping of the maximum contribution bases and the maximum pension. This increase in the maximum contribution bases would be accompanied by an increase in the maximum pension, although not in the same proportion. In its proposal, the Government proposed linking the evolution of the maximum contribution bases to the pension revaluation criteria, that is, to the average interannual CPI for the twelve months prior to December, plus an additional annual increase of 1,154 points between 2025 and 2050.

The increase in the maximum bases would be accompanied by an increase in the maximum pension, although not in the same proportion

Entrepreneurs are radically opposed to further cost increases, since with the new year the Intergenerational Equity Mechanism (MEI) comes into force, which establishes an additional final contribution of 0.6 points on gross salary, of which 0, 5% will correspond to the company and 0.1% to the worker.

Spain, at the forefront in the execution of the Recovery Plan

The entry into force of the reform of the Bankruptcy Law, of the regulation related to the Comprehensive Vocational Training System or of the Law on Measures to Prevent and Fight Tax Fraud, together with the first reform of pensions and in the system of Contributions for the self-employed has allowed Spain to be at the head of the countries in terms of the level of execution of the Recovery Plan. In this way, the Government of Pedro Sánchez has issued the request for the third disbursement of European funds. In the event of obtaining a positive evaluation by the European Commission, Spain would have already met 121 milestones and objectives out of a total of 416, 30% of the total milestones and objectives, and would receive a disbursement of 6,000 million euros.

In addition to those mentioned, others have also been adopted that lay the foundations for the development and promotion of investments related to innovative renewable energies. A package of reforms that, although it guarantees the funds to be received this first, does not ensure them for the spring game, where the Commission will review the second quarter restructuring of the pension system.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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