Social Security has taken this Friday 7.792 billion to be able to cope with extra pay of pensioners in December. Of se, 3.586 billion have been extracted from reserve fund, so-called Pension piggy bank. After this withdrawal, y will only remain in fund 8.95 billion in front of close to 66,815,000,000 that came to save in 2011. On or hand, Social security has also taken anor 4.206 billion that was missing from loan of 10,192,000,000 that was granted by government in last budgets. In June I had already used 5.986 billion to pay extra of summer. And now rest is exhausted to be able to pay December including liquidation of income tax.
At this time, monthly pension payments are financed practically with what is entered in month by workers ' contributions. But se resources are not enough to afford extra pay. In June and December, monthly payroll is doubled. It goes from a disbursement that round 8.8 billion euros to 17.47 billion to be spent this December. For those monthly payments, it is not enough to raise contributions. So government has to look for additional funds to finance it. As happened in June, this time it has been decided to combine two sources of funding: one is withdrawal of money from Pension piggy bank. And or is part of credit financed in charge of budgets, a loan that does not bearing interest and that has to be returned in ten years from 2018.
The good news is that Social financing needs are reduced, interrupting a bullish streak that began in 2012. Only in 2015 it descended punctually because remnants that had mutuals by value of 2.777 billion were set. But since gap between expenditure and income began in 2011, amount to be financed has been increasing. Last year, 20,136,000,000 was needed. However, this year have been employed 17,292,000,000, 14% less, this is: an improvement of 2.844 billion. If compared to 10,496,000,000 that was caught in December last year, need falls by 25%. The Ministry of Employment maintains that this improvement is because income is going up substantially. To extent that, according to employment, this year Social security could close with a record raise.
However, re is very little left of reserve fund. Just enough to face anor extra pay. Even if deficit continues to fall, government will have to continue to resort to loans unless system is reformed. Mariano Rajoy's executive managed this loan to avoid headlines that bank was running out of pensions. In end, it is not as important to exhaust reserve fund as debt is accounted for in net terms, i.e. less liabilities. Every time you take money out of Pension piggy bank, public borrowing goes up because you stop having an asset. Or what is same, increases as if borrowed. The advantage of Fund is that it generates returns and allows financing at low cost when markets demand high rates for ir loans. But that is not case now in an ultra-low interest rate environment. In practice, it has been all time financing deficit of pensions to a debt coup.
Since PP landed at Moncloa, 74,437,000,000 euros have been extracted from reserve fund. Between 2000 and 2010, thanks to Social security surplus, were provided to piggy bank 52,113,000,000 euros, to add 28,932,000,000 for returns that se resources have generated invested in public debt. At best time, 66,815,000,000 were recorded. Now you only subtract 8.95 billion at purchase price or 8.84 billion valued at market prices.
This collapse of amounts stored in piggy bank is result of a deficit between income and expenditure that began in 2011 and has gained weight every year. In 2016 it reached a maximum of 18,701,000,000, 1.67% of GDP. According to evolution of Social security accounts, this year could be first in which this deficit does not increase relative to GDP. It will probably stay at close of exercise right at 1.6%. Although in euros will probably rise slightly despite record collection. At end of 2017, pensions ' hole will represent roughly half of entire state deficit and be main budgetary challenge to be addressed. Especially when baby boom generation will begin to retire in next few years, pushing even more upward on spending. The political parties and social agents assembled in Toledo pact have mission to agree on a reform that, among or things, seeks additional income.