Pension reform: “The new Intergenerational Equity Mechanism gives carte blanche to the government for pension cutbacks”

Jul 15, 2021
On the 1st of July, the trade unions CCOO, UGT, CEOE and the Spanish Government signed the Pensions Agreement. Its very name indicates that it is the first block of pension reforms and that it is framed within the fulfilment of the Toledo Pact and the Plan presented by the Spanish Government to the European Commission in order to be able to access the European funds.

With this agreement more cutbacks are proposed, which is no surprise to ELA. In the first place, the Spanish Government’s plans were public. The documents presented to the European Union were committed to applying a series of cutbacks in pensions in two phases. The first one had to be approved before the end of 2021. The second one, next year. The new development regarding the documents that were previously in the public domain is that the IEM (MEI in Spanish initials – the new Sustainability Factor) will not be approved in 2022, but rather in the first reform package.

In second place, ELA has already carried out a negative valuation of the last Toledo Pact. And it is obvious that the Pension Agreement is an extension of this.

And finally, it is also well known that the so-called Social Dialogue has been (and as can be seen, continues to be) a mechanisms to accompany pension cutbacks with social harmony. The Agreement returns to the previously used path, in which Social Dialogue has been used to cover the cutbacks in the amount of new pensions or in the delay of the retirement age using different routes, as occurred in 2011 with the reform “agreed on” with Zapatero, to, amongst other steps, push back the retirement age to 67 years.

This agreement has been signed in a context in which the pensioners’ movement has permanently been on the streets since the beginning of 2018, which has given rise to the fact that from this year onwards, pensions have been increased at least in line with the CPI.

IEM: New name, the same cutbacks

The General Secretary has particularly underscored the Intergenerational Equity Mechanism (IEM) announcing: “The reform sets forth serious cutbacks, both in early retirement and in retirement generated by replacing the Sustainability Factor with the IEM. This gives carte blanche to the Government to adopt new steps in elements such as retirement age or when calculating new pensions.”

And the fact is that as Mikel Noval explains, the Sustainability Factor “is not being repealed”, rather it is being replaced by the IEM. The Stability Factor was formulated as an automatic mechanism for making adjustments to pensions. It enables the Government to make cutbacks in future pensions if life expectancy increases. If the expectancy is to live more years, the annual income is cutback. And this is what we can look forward to with this year’s reform by way of the IEM.” Additionally, he assured that if there is no agreement in the social dialogue before the 15th of November to specify the contents of the aforementioned mechanism, the Government will have a “free hand” to apply cutbacks when calculating pensions, to the retirement age or to the revaluation of pensions. For this reason, Noval believes that the statements made by the Minister Escrivá affirming that the baby boom generation would have to cutback their pensions and/or retire later, “are coherent with the agreement.”

Likewise, Janire Landaluze recalled that the reform does not only not take into account the request for setting the minimum pension at 1,080 euros, but it also affects the maximum pensions aimed at preventing early retirement, and she pointed out that the loudly-heralded revaluation of pension in terms of the CPI “in practice has been applied since 2018 through the State budget,” and this has been established for just 5 years, as at that moment, “the mechanism will be reviewed with social dialogue.”

Social dialogue: a mechanism to give cover to the cutbacks

ELA recalled that this agreement is the result of the so-called Social Dialogue, which is no more than “a mechanism to accompany the pension cutbacks with social harmony.” Accordingly, Mitxel Lakuntza has condemned the Toledo Pact and its philosophy: “this is what these debates are for: to accompany these cutbacks and to demobilise.”

For all these reasons, in the words of the General Secretary, ELA is going to demand the political parties with representation to “clearly re-think the cutbacks set forth in early retirement, as well as demanding the repeal of the Sustainability Factor without the option of its replacement by a new mechanism such as the Intergenerational Equity. Likewise, they should incorporate the demands set forth by the pensioners’ movement and the general strike of the 30th of January called by the Euskal Herria Charter of Social Rights.”