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The government last a decree to extend the credit of the pensions

The government will approve an increase of 0.25% for the benefits of retirees in 2018

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The government last a decree to extend the credit of the pensions

Last Friday, Social security used 7.792 billion euros to pay extraordinary Christmas pay that pensioners charge. Of this amount, some 3.586 billion came from that known as Pension piggy bank. And rest, anor 4.206 billion, took m from a $10,192,000,000 loan signed by government this year to help cover se payments in 2017.

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After withdrawing that money, loan is exhausted and Pension Reserve Fund only has resources to pay a single extra pay. But government has already got plan ready to guarantee benefits.

The executive of Mariano Rajoy is preparing to renew loan by means of decree of extension, as explained by government sources. This way, you will have an extra liquidity cushion to pay for pensions if necessary. It is foreseeable that Social security does not require to pull this credit until extra pay of next July. By n, government already expects to have new 2018 budget that will have some or aid to pay for pensions.

But to approve accounts you need support of PNV. And if political situation does not clear up after autonomous elections in Catalonia on 21 December, it could find it difficult to make budgets go ahead. In this case loan of 10,192,000,000 will be ready thanks to decree of extension.

The financial situation of Social security is worrying. It chains consecutive deficits since 2011. And Bank of pensions that came to count with 66,815,000,000 euros of margin has almost evaporated in last seven years. There are only 8.95 billion, equivalent of an extra pay. Although monthly pension payments are financed with what Social security raises each month with workers ' quotes, each time you have to deal with extra pay a hole is produced. The political parties have been negotiating in Toledo pact for months, a solution that allows gap to be plugged.

Officials will have to wait

If government follows same strategy as last year, officials will have to wait a few months to see an increase in ir payrolls beyond 1%. Until re are new budgets, it won't go up any furr.

The executive negotiates with main public employees unions (UGT, CC OO, CSI-F) a three-year pact that allows to recover some of lost purchasing power with crisis. Although re is no agreement yet, positions do not go far. Hacienda offers a rise of up to 8% in three years.

The remuneration plan would consist of a fixed and a variable part depending on growth and evolution of deficit. In any case, inflation will eat a part of rise.

Pension system expenditures are rising: new retirees charge more than average for death. However, verve with which labor market recovers will serve only as a short-term solution. Because it allows to increase collection by almost 5% per year, but many of new workers are precarious with low quotes.

Economic prospects point to an improvement in labour market, which should help to inject more and more resources into Social security. In this way, imbalance between expenses and system revenues can be reduced.

The government hopes that this year Social security will end with a lag of 18 billion, equivalent of 1.6% of GDP. The next hole will be less for improvement of labor market. Government official prospects for 2018 reduce red numbers to 1.1% of GDP, equivalent to 13.4 billion euros.

0.25% rise

The extension decree also includes increase of 0.25% of benefit to retirees, following wake of same year approved. This increase is result of applying pension revaluation Index — which calculates increase in terms of status of Social security accounts for past five years and projections for next five. In any case, government does not rule out some additional increases in benefits for some specific groups.

This increase in pensions will also lead to a loss of purchasing power because executive calculates that prices, which mark evolution of cost of living, increase by about 1.6% next year.

In government y are aware of problem of Social security, but y face it with some caution. "The pension system is guaranteed with total number of public revenues," insists Treasury. In context of Toledo pact discussed in Congress, several alternatives have been discussed, such as establishing some tribute that helps to fill coffers of Social security or to remove from system some benefits such as those of widowhood or orphan , which would be financed with or public resources.

But government of PP relies on recovery of system to job creation and increase in number of contributors. The problem will come in coming years when baby boom generation begins to retire. By n we should have reached an agreement that brings more income. Orwise, costs of system will overflow revenues and public deficit of Social security is out of control.

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