Spain’s Social Security system is expected to go broke by 2018.
In the US, concerns over such matters are virtually nonexistent.
But Spain cannot print Euros, and is already deep in the hole on meeting budget deficit targets.
Via translation from El Confidencial, Spain’s Social Security Reserve Fund Exhausted by 2018.
The Social Security reserve fund will run out of money in 2018. The cause in bonus payments to pensioners, which consumes every six months (in December and July) over 8.5 billion euros. Revenue from social security contributions are not sufficient to meet the payment obligations.
Starting in 2018, only an extraordinary contribution by the State would make it possible for Social Security can meet its commitments.
The financial problems of Social Security are not a temporary problem. The government itself expects that this year the public pension system will register equivalent to 1.1 percent of GDP deficit (about 11 billion euros ), while in 2017 planned is an imbalance equivalent to 0.9% of GDP.
In 2016, revenues from social security contributions recorded an accumulated a deficit of 12.24% compared to expectations. The deviation is even higher than the already recorded in 2015.
Spain Budget Deficit Wildly Off Target
Spain has missed watered down budget deficit targets a half-dozen times. Spain is already under pressure from Brussels to cut spending or hike taxes, by 8 billion euros.
Something has to give.
For more Spain’s fiscal mess, please see Spain Wildly Off Budget Target, Expect Alarm Bells and Warnings.
Mike “Mish” Shedlock
STEPHANE CAUSSADE said:
HI MISH DON T WORRY FOR SPAIN IL LIVE IN FRANCE AND NECT WEEK I WILL GO IN HOLIDAYS TO TOSSA DE MAR CHECK OUT ON THE WEB NICE BEACH FOR US FRENCH PEOPLE SPAIN IS LIKE MEXICO FOR YOU EVERYTHING CHEAPER
SPAIN IS INDEBTED LIKE EVERY EUROPEAN STATE BUT THEY ARE LUCKY TO HAVE REPUBLICANS /TORIES PARTIDO POPULAR CONDERVATIVES THAT IMPLMENT REFORMS AND DON T FORGET SPAIN IS NOT GREECE I HAVE ?SPÄNISH ORIGINS FROM MY MOM THERE ARE INDUSTRIES IN MADRID AND BARCELONA FOR INSTANCE AND BRAINS AH AH …
ALWAYS A PLEASURE FOR A RETAIL TRADER TO READ YOUR ICONOCLAST OPINIONS ON THE FINANCIAL MARKETS VERY INSTRUCTIVE
That chart looks skewed down a bit, but if you follow the calculations it is start 2018 that the reserve fund runs dry, where first missed payment would be mid year. So they are talking of creating a new tax, I suppose they could stop the ‘ bonus extra ‘ payments, both would be very unpopular.
Graf Zeppelin said:
So, what is(are) the lesson(s) here? The usual suspects (e.g. bad demographic projections; overly optimistic forecasts of economic growth; benefit promises disconnected from prospective revenues; a failure of parliamentary democracy; all of the foregoing; none of the foregoing) or a condition somehow unique to Spain?
Everything government touches turns to crap.
– Ringo Starr
All + a deluded self entitlement.
No worries, all they have to do is elect some leftist government just like like the Greeks did and that will solve everything… 🙂
A lot of countries are circling the drain and all the government lovers will get what they deserve.
They’ll never learn anything from it though. They’re the part of life that gets sacrificed so that evolution can occur.
Jon Sellers said:
Spain won’t make substantial reductions to its social security system. Any politician who attempted that would be kicked out of office. Taxes are already to high. So Spain will borrow to cover the deficit. Unlike Greece, Spain is too big to kick around. It will be fascinating to watch Brussels capitulation. Germany will not be happy.
Spain will borrow at essentially 0% interest rates, which is functionally the same as printing Euros.
At the moment the Brussels capitulation ceremony is a dance around how to avoid fining Spain (and Portugal) for missing deficit targets. They already delayed a decision until after the election re-run, to the fury of some over the (leaked) Juncker compromise , and now are trying to delay until well after summer. What is quite funny to watch is various politicians acting as if they have it all under control, when in fact there is still no legitimate government in place to make or handle decisions in the country, and no one’s position is guaranteed that far into the future. It is like watching a show of a show, if you understand my meaning.
Graf Zeppelin said:
Another “black eye” for democracy. As usual, there are no adults in charge. What was it that Mencken said?
Ron J said:
Spain is sinking with the EU. Greece is sinking with the EU. Italy is sinking with the EU.
A majority in Great Britain decided to not sink with the EU.
Spain just announced the EU will be sinking even faster than Brussels already feared.
Think a better explanation for Spain borrowing now is that everyone knows the house is on fire and will be declared a total loss. Grab as much as you can, no one will be able to prove what was stolen vs what burned up.
In the end, most people in Spain still won’t get paid (same for Greece). They will get a check of course, lying politicians don’t want to admit they are crooks.
But the check will buy less and less.
Germany’s Weimar republic gave people wheelbarrows full of worthless cash rather than admit their welfare system was defunct. The economic conditions that came out of that refusal to admit the problem led to Hitler’s rise.
History doesn’t repeat, it rhymes. Spanish (and Greeks) have only started rhyming.
I thought the importing of millions of muslims would solve this…
They need to start building camps for the riots which ensue when pension payments stop. Thank goodness we have ours ready with militarized cops to round them up when it happens here.
According to the Obama regime, Medicare also goes bankrupt in 2018 (this assumes ObamaCare doesn’t shove more people onto Medicare and push the bankruptcy date forward)
The need for and yet ultimate failure of Re-distributive pension plans are just one indicator of an inherent systemic scarcity of individual incomes in ratio to prices. You all can pi$$ and moan forever about inflation and the need for deflation or you can integrate Keynesian and Austrian theory and deal with both with Wisdomics/Gracenomics. Integration is Wisdom. Orthodoxy, especially rigid orthodoxy is stupidity. If you want to save profit making economic systems and not unconsciously support the death of them via rigid orthodoxy and the irrational computation that government intervention is ALWAYS synonymous with tyranny you will consider Wisdomics/Gracenomics.
Wonder if Mish will write a post about how soon US welfare systems will go bust.
I am sure Yellen will print currency until it chokes the life out of the economy, but real world prices continue to drastically outpace CPI or any other official lie.
Trader joe said:
This says a lot:
Rome has criticized the EU’s new banking regime and doesn’t want to use “bail-in” rules that prescribe the order in which stakeholders must bear losses for winding down an ailing bank, in part because of the peculiarities of the Italian banking system. About €187 billion of bank bonds are in the hands of retail investors, whose holdings would be wiped out by a bank resolution under the new rules.
EU has no time frame for UK to invoke Article 50. A prudent delay could have Austria, Italy, France, and Spain with UK at the negotiating table.
Huge Brit presence in Spain in terms of vacation homes, and investments in holiday rentals for other Brits.
Pound devaluation is hitting them hard. Just one of many second derivative plays on Breixt, which was just an alternative way of devaluing their currency. Wow, what a house of cards the global economy has become. Meanwhile the Chinese have been aggressively devaluing their currency with zero consequences. Hammer time is right around the corner.