Is the spanish “social security insolvent”?

Is the Spanish'sozialversicherung zahlungsunfahig'?

Image: Richard Ireland/

The Court of Audit has found a system that ran up a deficit of almost 100 billion euros between 2010 and 2017 alone

"The social security system is insolvent", had a sensationalist headline in the conservative newspaper El Mundo on Tuesday, as it reported a deficit of nearly 100 billion euros between 2010 and 2017. Thus, the Spanish Court of Audit felt compelled to respond to the Alarm Report, which was based on figures from Kostenhuter. In fact, as early as the end of 2017, the Court of Auditors had ied a "negative net assets" of almost 14 billion euros were found and the deficit between 2010 and 2017 was identified.

In reference to the newspaper report, the Court of Audit explained that the social security system cannot be compared to a company that would be insolvent with such figures. Behind the social security is the state. Such "alarming" words could "be interpreted to mean that payments (pensions, etc.) are not guaranteed", he criticizes the conservative newspaper.

While an insolvent company can no longer meet its payment obligations, all social security payments continue to be made. However, the Court of Auditors is calling for structural changes, as revenues are still not covering expenditures. Reserves, which had once grown to almost 66 billion euros, were completely used up by the conservative government before it was toppled by a motion of no confidence just under a year ago because of its massive corruption. The social democratic successors must now sweep up the pieces of the failed policy, for which they are not innocent, since they had already embarked on the austerity course at the beginning of the crisis before being voted out of office in 2011.

It is understandable that the system remained loss-making even after the official end of the crisis. And the trend remained bad even after 2017. In 2017, the state had to pay the social security funds a "Credit" From a good 10 billion euros to guarantee benefits, it was already almost 14 billion in 2018, even though unemployment has officially fallen. And the responsible secretary of state, Octavio Granado, had to put the deficit in the social security fund for the past year at 32 billion euros.

90 percent of all employment contracts are limited in time

Above all, the officially high unemployment rate of almost 14%, which is only surpassed by Greece, continues to prevent social security revenues from bubbling up. But this is not the only problem. In addition, a third of all jobs are only part-time, mostly unwanted and poorly paid.

About 90% of all new contracts are fixed-term contracts. In Spain, this is already 22% of all contracts. The quota is already twice as high as the EU average! A third of these only last less than a week. And this number has practically doubled since the beginning of the crisis. These conditions also prevent, for example, young people from finally being able to emancipate themselves from the parental home. More than 65% of young people between the ages of 16 and 34 still live with their parents, which is significantly more than 10 years ago (Why so many young people do not stand on their own two feet).

In view of high unemployment and underemployment, it is clear why revenues in the social security system lag far behind expenditures. In addition, there is a social security flat rate of 50 euros, with which the conservative process government has pushed people into Ich-AGs (Me Incorporated Companies). In 2018, just under 50.000 new self-employed people were added to the workforce, compared to only one-fifth of that number last year. Since they only pay the full social security contribution after two years, it will only become clear with a delay whether the Ich-AGs are viable and then improve social security revenues in real terms.

In addition, however, up to four million hours of unpaid overtime are worked every week, which can cost up to 100 percent.000 full-time positions. That is a loss of wages of about two billion euros per year with the corresponding losses in tax and social security funds. In this case, the social democratic government hastily introduced a timid change by decree shortly before the early elections in April, but it has had little effect in practice. Overtime is now to be recorded, but this is easy to undermine, as employees have described.

The Social Democrats (PSOE) point out that the increase in the minimum wage to 900 euros at the beginning of the year will increase social security revenues. However, the PSOE had to be driven to this by its left-wing supporters. Their partner Podemos, with whom they now have a "Cooperative government" instead of a coalition government, had called for an increase to 1000 euros. Because not only the social security funds should be strengthened, but also the situation of many people who often receive wages from which one cannot live even in Spain.

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