Spain to Freeze State Pensions in 2011
By Giovanni Legorano, Global Pensions
May 12, 2010
Spain
The Spanish government is set to freeze state pensions for 2011 as part of a package of measures aimed at reducing the country’s ballooning deficit and send a positive signal to markets.
This is part of what the José Luis Rodríguez Zapatero's cabinet has agreed with the other governments of the European Union, in last weekend's EU Council emergency meeting following severe market pressures on both the euro and government bonds denominated in the single currency.
EU governments agreed the 16 members of the Eurozone will have access to a €440bn (US$557.8bn) debt facility and €60bn of emergency European Commission funding. The IMF will also contribute €250bn. (Global Pensions, May 10, 2010)
As part of the deal, the European Central Bank announced it would buy Eurozone government and corporate debt.
The decision by the Spanish government means next year Spanish state pensions will not increase in line with the retail price index as normally required by law.
Minimum and defined benefit pensions will be excluded from this measure.
The government also decided to eliminate current rules allowing workers to retire before reaching retirement age on certain circumstances.
Other measures announced by Zapatero in a speech to the Spanish parliament include reducing civil servants salaries by an average 5% from June 2010 and freezing them in 2011.
Spain's announcements follow Greece's decision to cut pensions as as part of package of austerity and reform measures demanded by the EU and the
IMF.
According to media reports, Greek pension reforms include increasing women statutory retirement age to 65 from 60 and financial penalties and disincentives for early retirement. In addition, the 13 separate state-run pension funds will be reduced to three by 2018 in a bid to cut costs. State pensions will be frozen this year, in 2011 and 2012.
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