Debt will rise to 130% of GDP in 30 years if pensions are not reformed

Debt will rise to 130% of GDP in 30 years if pensions are not reformed

AIReF warns that this is not the most likely scenario, but if urgent measures are not taken, the future sustainability of the retirement system is not guaranteed

  The Independent Authority for Fiscal Responsibility (AIReF) remains concerned about what the demographic challenge in Spain may imply. The agency explains in its last Observatory of debt that in a scenario in which no measures are taken to neutralize the cost of raising pensions according to the CPI, the pressure on spending would imply an increase in public debt of about 50 points on the GDP in 2048. That is, the debt would rise to 130% of GDP, more than half a million euros if the GDP value of 2018 is taken into account.

   This large increase in spending is mainly due to the fact that starting in the 2030s, pensions will rise considerably because the baby boom generation will begin to retire. In the medium term, in a scenario in which the policies remain the same, the debt would stabilize at 90% of GDP until 2030, and will grow since then, the text says.

Both this 90% and 130% of GDP that is estimated is far from the 60% required by the European Stability Pact and the figures that imply the sustainability of the pension system, for which the body calls for urgent measures.

AIReF proposes two other scenarios that are not so alarmist if measures are implemented, even if the link between pensions and the CPI is maintained. The second proposal is for the administrations to take action on the matter and reduce their structural deficit (13% for communities and 44% for Central Administration and Social Security), which could reduce the debt below 75%.

The third scenario implies that reforms were made to reduce the impact of population aging, which would reduce debt to 60% in the medium term, according to the AIReF document. For example, they talk about the deepening of the pension reforms of 2011, the retirement age and extend the period of calculation of the pension to 35 years of working life.