Governor of the Bank of Spain Defends Pension Reform Amid AIReF Evaluation
José Luis Escrivá highlights sustainability of pensions following positive assessment by Independent Authority for Fiscal Responsibility.
José Luis Escrivá, the Governor of the Bank of Spain, has expressed satisfaction regarding the sustainability of pension systems in Spain.
His remarks came after the Independent Authority for Fiscal Responsibility (AIReF) conducted an evaluation of the pension reform he had previously implemented during his tenure as Minister of Social Security.
Escrivá stated that the findings confirmed the pensions align with 'what society has decided is sustainable in the medium term.'
The AIReF assessment is crucial for the future of pensions in Spain as a negative evaluation could lead to mandated measures to either reduce expenses or increase revenues within the pension system.
Escrivá emphasized that, 'for the first time in Europe, and arguably in the world, the sustainability of pensions has been evaluated by an independent institution objectively and autonomously.'
However, AIReF President Cristina Herrero noted limitations in the evaluation design, indicating that the authority's responsibility within the context of this report is significantly constrained.
It was Escrivá himself who designed the reform being evaluated and the methodology of the evaluation, which pertains to the dual pension reform phases enacted in 2021 and 2023.
In his current capacity as Governor, Escrivá highlighted the AIReF's conclusion that 'is compliant,' aligning with legal provisions that define sustainability as a pension expenditure that does not exceed 15% of GDP on average by 2050, nor 13.3% for net spending related to income measures adopted by the government.
Contrary to Escrivá's assertions, the AIReF report indicated a deterioration in pension sustainability as a result of the reforms he instituted.
Herrero commented on the compatibility of a worsening expenditure trajectory with fulfillment of expenditure rules for pensions.
This interpretation coincides with earlier analyses from the Bank of Spain, which had suggested that Escrivá's reforms could undermine the sustainability of the pension system.
Escrivá acknowledged the importance of AIReF's reminders regarding the sustainability of public finances based on rigorous evaluations.
He introduced a 'closure clause' as a significant innovation in the pension system, indicating that the AIReF will conduct evaluations every three years to determine compliance with the specified criteria.
If those criteria are not met, a semi-automatic adjustment mechanism would be triggered, requiring the governing administration to present a correction plan or risk automatic reductions in expenditure or increases in social contributions.
Currently, however, no such adjustments are necessary, as the AIReF verified that average pension expenditure up to 2050 will stand at 14.6% of GDP, and net expenditure will be at 13.2%, both figures marginally better than the established thresholds.
Escrivá acknowledged the challenges of making long-term projections to 2050, asserting that the AIReF will need to 'review every three years' the pension expenditure performance to recalibrate its projections.
His remarks came after the Independent Authority for Fiscal Responsibility (AIReF) conducted an evaluation of the pension reform he had previously implemented during his tenure as Minister of Social Security.
Escrivá stated that the findings confirmed the pensions align with 'what society has decided is sustainable in the medium term.'
The AIReF assessment is crucial for the future of pensions in Spain as a negative evaluation could lead to mandated measures to either reduce expenses or increase revenues within the pension system.
Escrivá emphasized that, 'for the first time in Europe, and arguably in the world, the sustainability of pensions has been evaluated by an independent institution objectively and autonomously.'
However, AIReF President Cristina Herrero noted limitations in the evaluation design, indicating that the authority's responsibility within the context of this report is significantly constrained.
It was Escrivá himself who designed the reform being evaluated and the methodology of the evaluation, which pertains to the dual pension reform phases enacted in 2021 and 2023.
In his current capacity as Governor, Escrivá highlighted the AIReF's conclusion that 'is compliant,' aligning with legal provisions that define sustainability as a pension expenditure that does not exceed 15% of GDP on average by 2050, nor 13.3% for net spending related to income measures adopted by the government.
Contrary to Escrivá's assertions, the AIReF report indicated a deterioration in pension sustainability as a result of the reforms he instituted.
Herrero commented on the compatibility of a worsening expenditure trajectory with fulfillment of expenditure rules for pensions.
This interpretation coincides with earlier analyses from the Bank of Spain, which had suggested that Escrivá's reforms could undermine the sustainability of the pension system.
Escrivá acknowledged the importance of AIReF's reminders regarding the sustainability of public finances based on rigorous evaluations.
He introduced a 'closure clause' as a significant innovation in the pension system, indicating that the AIReF will conduct evaluations every three years to determine compliance with the specified criteria.
If those criteria are not met, a semi-automatic adjustment mechanism would be triggered, requiring the governing administration to present a correction plan or risk automatic reductions in expenditure or increases in social contributions.
Currently, however, no such adjustments are necessary, as the AIReF verified that average pension expenditure up to 2050 will stand at 14.6% of GDP, and net expenditure will be at 13.2%, both figures marginally better than the established thresholds.
Escrivá acknowledged the challenges of making long-term projections to 2050, asserting that the AIReF will need to 'review every three years' the pension expenditure performance to recalibrate its projections.
Translation:
Translated by AI
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