The Spanish government has been engaged in extensive negotiations with the European Commission regarding its pension reform, aiming to demonstrate the system's sustainability.

The initial assessment of the reform, crafted by former Minister of Social Security, José Luis Escrivá, and conducted by the Independent Authority for Fiscal Responsibility (AIReF) on March 31, 2023, concluded that the "closure clause" requiring additional adjustments did not need to be activated.

However, the commission raised concerns about the reform's underlying financial metrics.

AIReF's evaluation noted that its results were achieved by applying a spending rule influenced significantly by the timing of its calculation, which was described as overly sensitive to fluctuations and providing a limited perspective on the system's sustainability.

In a subsequent move, the Spanish government aimed to comply with European requirements by adjusting its approach, specifically by retracting its previous accounting practices that classified state transfers as pension system income—designated to cover the shortfall from social security contributions through taxation.

This amendment has been characterized by some experts as a form of "accounting maneuvering" to secure a favorable assessment and to avoid anticipated adjustments in spending.

Despite these changes, AIReF’s initial evaluation had reported that only a minimal proportion of these transfers were considered actual reinforcements of system income, accounting for just 0.3 points of the overall 1.3 percentage point increase in transfers since 2020. Analysts expressed skepticism that the new adjustments proposed by the government would substantially alter AIReF's evaluation outcomes, suggesting that the economic improvements from recent upward revisions would offset any adjustments.

Miguel Ángel García, an applied economics professor and researcher at Fedea, noted that while it is positive for the European Commission to pressure against governmental interference in the interpretation of the closure clause, the modification is likely to yield only marginal improvements in assessment outcomes.

He cautioned that even if the closure clause were met, persistent and rising deficits remain unchanged.

Concerns continue over the government’s disregard for AIReF's warnings regarding the effectiveness of the spending rule for pensions, which many deem inadequate for measuring the system’s sustainability.

Enrique Devesa, a Valencia University professor and IVIE researcher, highlighted that despite the elimination of transfers from income calculations, several government dictated measures still quantify contributions related to employment dynamics as income.

AIReF also advised that the pension spending rule should be integrated into a broader fiscal framework to simplify the current system.

The latest government decree appears to incorporate this recommendation while still retaining the mechanism to determine the necessity for additional adjustments, which AIReF has already indicated is invalid.

The closure clause was negotiated with Brussels in March 2023 to avoid exceeding budgetary limits following the linkage of pension adjustments to the Consumer Price Index (CPI).

Over two years later, Escrivá, now the Governor of the Bank of Spain, has distanced himself from sustainability discussions, stating that the central bank does not possess the technical capability for such evaluations, thereby shifting the responsibility solely to AIReF.

Concurrently, European authorities have issued recommendations regarding pension reform as part of ongoing assessments connected to EU recovery funds, prompting the drafting of the new decree to foster greater transparency in efforts to reinforce confidence in the system's sustainability.