A New Crisis Is Brewing in Spain

wolfstreet.com / by Don Quijones • Dec 24, 2016

The government raided the state pension fund. And now what?

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

When the Rajoy administration took the reins of power at the end of 2011, at the height of Spain’s debt crisis, the country’s Social Security fund had a surplus of over €65 billion, the result of a gradual accumulation of funds since the end of the 1990s. That money was supposed to serve as a nationwide nest egg to help cover the growing needs of Spain’s burgeoning ranks of pensioners. Instead, it has been used by the government to fill some of its own massive fiscal gaps, with the result that now, five years later, the total surplus has shrunk by 75%, to €15 billion.

Things have gotten so bad that in October the Spanish government was forced to admit to the European Commission that by the end of next year the surplus will have become a deficit, of around €2.6 billion. In other words, a fund that took 16 years to build up will have been plundered dry in less than half that time, at an average rate of around €11 billion a year.

The outflow reached torrential proportions this year. To date the government has removed over €19 billion from the fund — more than remains in its coffers. The biggest ever one-off withdrawal took place at the beginning of December when Spain’s new coalition government, with Mariano Rajoy still at the helm, plucked €9.5 billion out in one fell swoop. Part of the money will be used to cover the extra pay check Spanish civil servants receive at Christmas.

READ MORE

The post A New Crisis Is Brewing in Spain appeared first on Silver For The People.