Spain considers raising retirement age, slashes spending - Summary

Madrid - The Spanish government Friday approved a proposal to raise the retirement age from 65 to 67 years, and announced budget cuts worth 50 billion euros (70 billion dollars) in new attempts to strengthen an economy eroded by recession. The government says raising the retirement age from 2013 onwards would put Spain in line with a policy recommended by the European Union and with reforms adopted in several other EU countries.

By 2050, 32 per cent of Spaniards are expected to be older than 64 years. "We need to be conscious that the population is ageing and that the system must remain sustainable," Deputy Prime Minister Maria Teresa Fernandez de la Vega said.

But Ignacio Fernandez Toxo of the far-left trade union confederation CCOO said he hoped parliament would not approve the reform, which he described as not making sense in a country suffering from high unemployment.

Prime Minister Jose Luis Rodriguez Zapatero's Socialist government presented its proposal following an announcement by the National Statistics Institute (INE) that unemployment had soared from nearly 14 per cent in 2008 to nearly 19 per cent in 2009, twice the EU average.

More jobs might be lost in the first quarter of 2010, but the economy was beginning to recover, Economy Minister Elena Salgado said.

Both conservative and far-left opposition parties slammed increasing the retirement age as an "unnecessary" reform given that Spain's social security budget was in black numbers.

Although the official retirement age is now 65 years, Spaniards retire at the age of about 63, on average. The planned reform would set a retirement age of 67 for people born in 1959 or later.

Salgado expressed confidence that a consensus would be reached to approve the reform.

The government, meanwhile, announced spending cuts of 50 billion euros by 2013 in an attempt to slash the budget deficit, which climbed to 11.4 per cent of gross domestic product (GDP) in 2009, according to a figure given by Salgado.

That is more than three times the 3 per cent threshold set by the EU, at a time when Spain holds the rotating EU presidency.

The government has tried to keep unemployment at bay with stimulus measures, such as public works which gave temporary employment to hundreds of thousands of people.

The stimulus packages boosted the budget deficit, prompting the government to raise taxes in 2009.

The new budget cuts will reduce the state budget by 40 billion euros and spending for regional and local administrations by 10 billion euros, affecting most policies, Salgado said.

Spain has been hit harder than most European Union countries by the global crisis, with the collapse of its key construction industry affecting other sectors as well.

The International Monetary Fund (IMF) does not expect Spain to rise out of recession before 2011.

Source: Earth Times.
Link: http://www.earthtimes.org/articles/show/306594,spain-considers-raising-retirement-age-slashes-spending--summary.html.