PUTTING PENSIONS IN TO THE FRONT LINE

The economic crisis that started in the banking sector in the USA quickly spread around the world and engulfed the majority of nations. However it affected different countries in various ways. For instance one of the most visible signs in the UK was the collapse of the banks whereas in Spain the financial institutions have remained fairly stable.

Make no mistake thought the financial crisis in Spain has been severe and it is the only major EU economy still in recession. Unemployment is also the highest in the EU whilst the worst hit sector has been the construction industry.

So it is no surprise that the Spanish socialist government is having to look at drastic ways of dragging the country out of the downward spiral that threatens the financial and political stability of the nation. What has come as a surprise is that the PSOE government has chosen to put pensions in to the forefront of that battle. It has caused a rift between the socialists and those on the far left of Spanish politics in Izquierda Unida.

One major difference between Britain and Spain is that whilst centre right and centre left parties predominate the far left in Spain plays a major role whereas in the UK it occupies the fringe. There are IU councillors, town halls and provincial administrations as well as MPs at regional, national and European level. So when the IU decides to mobilise it matters.

At present the pension age in Spain is 65 and to qualify for a State pension you have to be in the scheme for 15 years. What the government of José Luis Rodríguez Zapatero is proposing is that the age should be moved to 67 with the suggestion that workers should be in the system for 25 years. That forms part of the PSOE government’s financial rescue plan to be presented to the European Commission in Brussels. If implemented it would affect every worker below retirement age, immediately.

The IU case is quite simple. The pension age should remain at 65; the qualifying period should stand and the current system whereby the value of pensions is maintained because they rise with the inflation index (IPC) should not be altered.

The rise from 65 to 67 is the tip of this iceberg. If the qualifying period was increased from15 to 25 years that would leave many people now at the end of their working lives without any hope of qualifying. Also it has always been accepted that apart from any increases awarded by the government of the day the pensions would keep pace with inflation with the IPC linked annual rise.

In a report on the issue the Secretaría de Economía y Trabajo of the federal IU argues that the socialist government’s policy will benefit the nation’s banks who market private pension schemes. It believes that if State pensions are to be low and difficult to obtain then workers will want to contract with a private pension instead. Is it not ironic that to solve a crisis started by the banks it is those selfsame financial institutions who would benefit at the expense of the workers? Has it not always been so?

The Zapatero government argues that the changes are necessary because currently State pensions account for 8 per cent of PIB (Britain’s GNP). It points out that in Italy pensions account for 14 per cent of PIB but there are no plans to increase the qualifying age whilst in France where the qualifying age is 60 there are no plans to alter the qualifying period. In Spain the pension system is in good shape with an 8,500 million surplus in 2009 – the year the financial crisis was at full force.

The IU is to take to the streets to make its case. It was 11 years ago that the party collected a petition of 500,000 signatures and presented it to the Spanish lower house of parliament, Congress. This action allowed its proposal for the working day to be reduced from 40 to 35 hours to become an Inciativa Legislativa Popular (ILP). Now the federation of leftist groups is to take the same action to keep the pension age at 65 through the ILP voice of the people.

Gaspar Llamazares, the IU spokesperson in Congress, did not mince his words. He stated: “If the Executive does not withdraw this proposal there is no possible negotiation. This cannot be negotiated. The president must appear in Congress and withdraw this measure that breaks the pact with the parliamentary left and the workers.”

The IU is not alone and the main Spanish unions, the CC.OO and UGT, have called for demonstrations that will run from February 23 to March 6 in all the major cities. The battle lines have been drawn.

Now back to Britain. At some stage in the not too distant future the British Government of the day is going to have to tackle the financial chaos. Nothing is going to happen before the next election. However once a government is returned the socialists, conservatives or a coalition who then have a mandate to rule will act. How they act will be governed by their political perspective but act they will and it could well be the State pensions that are in the firing line.