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The government will inject 15 billion to pay pensions in 2018

The Treasury loan to Social security is 50% higher than that granted in 2017

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The government will inject 15 billion to pay pensions in 2018

In 2017 Social security paid some of pensions with a loan from Treasury. It was 10,193,000,000. This year it was clear that, again, it was going to be forced to resort to a credit of general budgets, for time being extended. The collection will end in historical Maxima, but also spending, which continues to grow inexorably. How much would that credit amount to? So far it was unknown, but this Monday Treasury has shed light on this amount. Emma Navarro, its general secretary, has advanced a "prudent estimate": about 15 billion euros.

More information
  • The pension piggy bank only has money for one more pay
  • Employment estimates that it'll spend up to 4 billion more than ' Pension piggy bank '
  • A loan of 10,192,000,000 to pay for pensions

This amount amounts to an increase of almost 5 billion compared to last year's loan and figure in budgetary extension that is currently in force. Since last year no new accounts were approved for this exercise, officially anticipated credit, for moment, is exactly same amount as in 2017. The law does not permit changes of this type in budgetary extensions.

Since 2012, contributions collected are not enough to pay tax pensions. The difference between what has been entered and spent has gone into more in se six years. This has led to employment to go through savings during boom season, that is, to consume accumulated in reserve fund, which went from a maximum of 66,815,000,000 to end of 2011 to 8.95 billion registered in 2017. In total, in this period 74,437,000,000 of piggy bank have been used. The money spent exceeds maximum accumulated at end of 2011 because during se years assets in which y were invested have had a high performance.

Last year Social security avoided with loan of Treasury that so-called piggy Bank of pensions was exhausted. This saved headlines in press he was carrying. If credit is confirmed in advance this Monday by Navarro, neir this year will end reserve fund. That is at least plan that Ministry of Employment explains, provided that budgets are approved. If y do not have m, y will have to combine loan of 10 billion again with a withdrawal from reserve fund. This is plan B according to sources of employment.

In addition, in 2018 it is possible that Social security financing needs will be reduced slightly, interrupting a bullish streak that began in 2012. For first time in seven years, difference between pension disbursement and contributions will be cut. This would have already happened in 2017 if one takes into account forecast of deficits collected in budgets: 16,679,000,000. However, Social security sources believe that this amount will eventually be closer to 18,537,000,000 than 2016. Although figure will go down if measured relative to GDP. That is: it decreases from 1.66% of GDP recorded in 2016.

Usually, income from Social security contributions is enough to cope with an ordinary pension allowance, which in December reached 8.881 billion. The problem comes when you have to pay extraordinary pay for July and December. So challenge for Treasury of Social security is doubled and it has to finance about 9 billion more. The quotes do not give to cope with this disbursement and you have to use extraordinary resources like those of Reserve Fund.

The Treasury loan has no additional impact on public debt or public deficits, said Treasury owner. This is because public debt is calculated by subtracting assets of State, such as reserve fund, into debt. When money was taken from piggy bank, assets of State were lowered and, refore, public debt increased same as when borrowed from market. In or words, it simply changes way in which hole is financed: y used to collect resources from reserve Fund and will now be collected directly from markets.

The Treasury strategy

During presentation of Treasury strategy for this year, Emma Navarro has indicated that net emissions-this is what increases debt-will be reduced again after last year increase in about 10 billion for credit to pensions. In 2012 y amounted to 96 billion due in part to bank bailout. In 2013 y were located at 73 billion because public deficit was still very high. In 2014 y fell to 55 billion as public deficit decreased. In 2015 y roamed 47 billion. In 2016 y touched ir lowest point with 35 billion. And in 2017, this descendant trajectory was interrupted by going up to 45,031,000,000 for loan of 10 billion to Social security. In 2018, forecast is that Treasury captures 40 billion net, 11% less than last year but still 5 billion above minimum of 35 billion.

With respect to gross emissions-which add up debt plus renewal of maturities-, y are receding from 233.9 billion 2017 to 220,145,000,000 planned for 2018. The Ministry of Economy stresses that se emissions are being made to historically low rates. The average cost of outstanding debt was cut back last year and is at a historical minimum of 2.55%. The average cost of emissions in 2017 remains at levels never known but has risen very slightly: only one hundredth of 0.61% from 2016 to 0.62% of 2017. However, se types benefit greatly from ECB's public-debt purchases. Only in 2017 it acquired 79,929,000,000, almost twice net emission. This year, Eurobanco will cut in half se purchases, which could end up affecting se guys so low.

On or hand, as explained by Navarro, Autonomous communities will receive this year of central state about 17.5 billion euros through extraordinary mechanisms of financing. Of se, about 5.6 billion, 32%, will be directed to Catalonia, a percentage similar to last year.


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