Escrivá agrees with Brussels and Podemos on the pension reform

After weeks of more than discreet negotiation, the Minister of Inclusion and Social Security, José Luis Escrivá, has managed to square the circle.

Thomas Osborne
Thomas Osborne
09 March 2023 Thursday 22:36
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Escrivá agrees with Brussels and Podemos on the pension reform

After weeks of more than discreet negotiation, the Minister of Inclusion and Social Security, José Luis Escrivá, has managed to square the circle. He has been able to agree both with Brussels and with his government partner, Podemos, the last phase of the pension reform. In order to unblock the most critical point of the negotiation, such as the extension of the pension calculation period, he has had to find a double formula, in which the current system will coexist with the new one for 20 years.

To be precise, the current calculation of 25 years will coexist with a new one of 29 years, with the option in this case of eliminating the two worst years. During these two decades, each pensioner will receive the pay that comes out better when comparing the two years. In this way, people with an already advanced professional career will not see their benefits reduced because they will be able to maintain the previous system, and at the same time, the youngest will have a more flexible system, which is better adapted to current professional careers, which are less linear. and that they do not always have their best period in their final phase.

Although the Ministry of Inclusion calculates that the new system will benefit one in three pensioners, both Podemos and the social agents feared the political impact of extending the calculation period, even with conditions. What is inevitable is that the coexistence of the two systems will mean an increase in spending above what was expected, so Escrivá has had to negotiate compensation with the European Commission, always concerned about the stability of the pension system. In this sense, "other elements of the system have had to be adjusted," according to sources in the negotiation.

One of the possible adjustment elements is to extend the Intergenerational Equity Mechanism (MEI), which supposes an additional 0.6% of social contributions, until 2050, when it was currently planned to maintain it only until 2032.

The proposal put forward by Escrivá also includes other points, such as the so-called uncapping of the maximum contribution bases, that is, increasing the limit, currently set at 4,495 euros per month, on which the contributions are applied. It is a formula to ensure higher income, and with it, also guarantee the stability of the system. Other elements are an improvement in non-contributory pensions and also initiatives to solve the contribution gaps that many of the current professional careers present. However, the fundamental piece of the agreement is based on the commitment to modify the period of time used to calculate the pension.

It was a critical element on which, up to now, all attempts at consensus had collided. A first indication of the closeness of the agreement was given yesterday by Escrivá when he stated that he had "practically" closed an agreement with Brussels on the pension reform . He also called today's meeting with the social agents and, if all goes well, he will appear next Wednesday at the Toledo Pact commission to present the results.

"We are practically reaching an agreement with what seemed important to us as well and it was an in-depth discussion of all the elements of the reform with the European Commission," Escrivá said at the Finance Observatory organized by El Español and Invertia.

It is logical that Escrivá has focused his efforts both in Brussels and on convincing the parliamentary groups because it is one of the conditions that the unions have set for him, that he have political support before requesting their approval. In all of them the adjusted approval of the labor reform is still very present, and that it reached Parliament with the support of the employers and the unions.

It will not be foreseeable what will happen now. There is room for an agreement with CC.OO. and UGT, but with employers the differences are greater. He is opposed to extending the computation period and to the top of the maximum bases, apart from the fact that his relationship with the Government is going through low hours.