The governor of the Bank of Spain, Pablo Hernández de Cos, has reaffirmed his calculations on the pension system after the Minister of Social Security, José Luis Escrivá, described them as “unsophisticated”. He once again argued that the measures proposed are not enough to ensure sustainability once pensions have been linked to inflation and the sustainability factor has been eliminated: “If you add and subtract, there is a gap that has to be covered,” he said in an appearance in Congress on Wednesday. However, he pointed out that we will have to wait for the second part of the pension reform to see if more measures are needed.

The governor also insisted that pensioners and civil servants should participate in the income pact to moderate wage increases and avoid an inflationary spiral due to a loss of income produced by energy bought from outside. In part, this must be done because of the need to bring public finances back on track. A gradual, medium-term plan is needed to bring down the structural deficit. If nothing is done, public debt will rise beyond the current high levels due to the ageing of the population, warned the Bank of Spain governor.

Following the Social Security Minister’s criticism, Hernández de Cos explained that in the coming years there will be a significant increase in the retired population in relation to the working population. And that this will generate high pressure on the pension system. The 2013 reform covered part of this increase in expenditure, he pointed out. But he admitted that this was done at the cost of significantly lowering the average pension in relation to the average contribution: “In other words, generosity was reduced. This was not politically viable”. That is why benefits have been linked again to the CPI.

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