Weaknesses and new rights

Pablo José Martínez Osés
Plataforma 2015 y más

In Spain, per capita social expenditure is below the average for the 15 EU member countries before the 2004 expansion (EU-15), and the government has to face the challenge of closing this gap. Since 1998 the country has accumulated a social security surplus, which is a compelling argument against proposals to privatize social insurance and thus divert resources from the public treasury. In the social sphere, new rights such as those of people who are dependent on care have been recognized, but it will be difficult to implement measures to satisfy these new demands.

One of the basic pillars of Spanish social security is that it isuniversal, and provides access to contributory and non-contributory pensions forall. The system is based on compulsory contributions to a common fund, andbenefits are paid in accordance with different categories based on labour andpersonal circumstances. In 1995 the government signed the Toledo Agreement(still in force), which established the separation of funding sources; thismeans that contributory pensions are financed from contributions andnon-contributory pensions from the general state budget.

However, comparisons with the figures for the 15 members ofthe European Union before the 2004 enlargement of the bloc (EU-15) revealcertain weaknesses in this social protection system. Spain is still enjoyinggreater economic growth than the European mean, and average wealth as income percapita stands at 91% of the average for the EU-15.[1]But social spending per capita is only 62% of the average for these 15countries. According to EUROSTAT (2006), in 2003 Spain allocated 19.7% of itsGDP to social protection, while the figure for the EU-15 group was 28.3%. Expenditure for the most vulnerable sectors (the elderly, thedisabled and the very poor) comes to only 9.8% of GDP, which means Spain is second to last in the EU-15 ranking.In contrast, Sweden allocates 17.6% to this sector, and Germany 14.7%.

The amounts that are actually paid in social security pensions follow the samepattern. The average contributory pension in Spain comes to only 68% of theEU-15 figure, and non-contributory pensions stand at only
-46% of the average for theEU-15.[2]

The debate about the viability of thesocial security system

There is concern in Spain, as there is in the rest of Europe, about howfinancially viable the pension system will be in the decades to come, given thatthe population in general is ageing. The so-called demographic dependency ratio[3]could rise with the increase in life expectancy, and this would mean thatcontributions from the active population would be insufficient to cover thecosts of the system. The European Commission has issued statements to thiseffect,[4]warning of the danger of the system collapsing, and it is coordinating anexchange of information among EU countries about reforms to European pensionsystems.

But what is involved here goes beyond just bringing the amounts paid and thecoverage provided in the Spanish system up to the levels of the Europeanaverage. Another related aspect of the situation is that private businesssectors close to the spheres of power
(Sáezand Taguas, 2007[5]) arepromoting the idea that pension reform should involve the privatization ofsocial insurance. The proposal is to replace the present payments system with anindividual capitalization system in which each working person would subscribe onan individual basis to a private pension plan. In fact, private pension plansthat are voluntary and complementary to the universal public system – and thatinvolve tax incentives – are already in operation.

These proposals would mean gradually extending privatization, and the suggestionis that public protection should be reduced to a common minimum while two othersystems (one compulsory and the other voluntary) involving individualcapitalization with private organizations would be set up. Besides this, thereis also a move to raise the retirement age from 65 -to70. These changes would open the door for banking organizations, savings fundsand life insurance companies to get their hands on this enormous goldmine ofresources that is currently administered by the public treasury, and the usualarguments about greater profitability and efficiency have been used to supportthis idea (Navarro, 2007).[6]However, these proposals run counter to the recommendations of theabove-mentioned Toledo Agreement, and they are not accepted by the presentgovernment or stakeholders.

A bill was brought before parliament recently proposing that the reserve fund ofthe pension system (which is fed with surpluses from the social security fund)be quoted on the stock exchange and be administered by private financialorganizations, in line with principles of security, profitability and social,economic and environmental responsibility.

These proposals threaten to undermine a mechanism that helps to guarantee socialrights and foster the redistribution of income, and they ought to be dulyexamined and responded to. In spite of the frequent predictions that the pensionsystem is headed for collapse, the fact is that since 1998, the Spanish socialsecurity system has actually accumulated a surplus. There are various reasonsfor this, including a massive influx of women and immigrants into the labourmarket, which has the capacity to absorb even more. If women’s participationin the Spanish economy was at the level of the European average, nearly threemillion more women would join the labour market as new contributors. It followsthat if the government invested in programmes to promote the labour insertion ofwomen and immigrants, this would serve to consolidate the present pensionsystem.

The argument about increased profitability is clearly questionable, sincenumerous studies have shown that the costs of running private individualcapitalization systems are much higher than those of public social security, andwhat is more, the cost of a changeover from one system to the other could amountto as much as 10% of GDP. 

In response to this pressure for privatization, even if we accept the predictionthat the pension system will eventually collapse, there are other alternativeways to ensure that it will remain viable in the future. The tax burden in Spain(the percentage of taxes over GDP) is still among the lowest in the EU-15countries, so income from this source could be increased – preferably in theform of progressively incremented income taxes, since this contributes to theredistribution of wealth. Another measure could be to promote a lengthening ofactive labour life beyond the age of 65 with the option of flexible timetablesfor those who wish to continue working.

New rights, new challenges

New laws have been enacted in Spain recently to permit same-sex marriages and toeffectively ensure equality between women and men; these broaden the recognitionof rights and incorporate measures for ‘positive discrimination’. Meanwhile,in November 2006, Congress passed the Lawto Promote Personal Autonomy and Care for Persons in a Situation of Dependency(the Dependency Law) which covers care for the elderly and people living withserious disabilities who find it difficult to cope for themselves in everydaysituations. This sets up a scale for evaluating the seriousness of cases ofdependency so that support can be provided. Thus, with the Dependency Law, Spainis recognizing a new right that is universal, subjective and completelyeffective: the right of people who cannot look after themselves to be cared forby the state. In addition, remuneration will be paid for services that up to nowhave usually been ‘invisible’, tasks involving family care that fall mainlyto women   (andalso immigrants) and which are not given a valuation in the sphere of work.   Thislaw has been called the fourth pillar of the welfare state, but in fact it onlyamounts to a part of that pillar, which also consists of other social services.

The Dependency Law is important because it recognizes a right for 1,125,000people
(IMSERSO, 2004), and this figure will undoubtedlyrise in the years ahead. Implementing the law means a whole series of bigchallenges will have to be met, particularly since social and health careservices are very decentralized. This will involve not only economic transfers,some of which have already been enacted, but also mechanisms for interregionalcoordination and support, which have been poorly developed up until now.

The law will be implemented progressively, beginning in 2007, until the entiredependent population is covered in 2015. This will call for budget allocationsthat will amount to more than EUR 12 billion (USD 16.34 billion) by the end ofthe eight-year cycle, which is slightly more than 1% of GDP. Successfulimplementation of this commitment will require far-reaching political andregional agreement.

The new law might expose the fact that, in Spain, there is a serious lack ofinfrastructure adapted to the needs of this population sector, and unfortunatelythere is no commitment in the offing to make this kind of investment.

Cooperation for development:  pendingconsolidation

In 2006 Spanish official development assistance (ODA) continued to increase, andefforts to gear aid to the fight against poverty continued. In addition, at theend of the year the Foreign Debt Law was enacted, which linked some elements ofdebt management to the fight against poverty. This law ought to be appliedpromptly to consolidate its provisions, mainly those that have to do withmodifying the mechanisms that generate foreign debt, namely the DevelopmentAssistance Fund and the Spanish Export Credit Insurance Company (CESCE).

The government has also put into operation and strengthened new instruments inline with the recommendations of the 2005 Paris Declaration of the
Organization for Economic Cooperation andDevelopment (OECD). The initiatives to convert debt into development projects anddirect support for national budgets in countries that receive aid should beintensified and extended to more countries,   and greater social control andparticipation in how these budgets are oriented and executed should be promoted.These kinds of measures canmake a direct contribution to much-needed investment in basic social services,which is something governments in developing countries must do if they are toprogress towards the Millennium Development Goals set in 2000.

It is less than a year since important legislation for Spanish developmentassistance was concluded, and action must be taken to promote some basicmeasures so that the trends that were initiated should not be merely transitory.It has become urgently necessary to impose regulations (which people have beendemanding for some time) to sever the links between economic and commercialinterests and Spanish foreign assistance, and to thoroughly overhaul the systemthrough which Spanish cooperation is managed (the Spanish InternationalCooperation Agency). Almost the only step taken in this reform so far has beento announce it, and there will have to be a commitment from various ministerialdepartments to inaugurate structures for political and strategic guidance thatis well prepared and coherently coordinated, so as to achieve solid cooperation.The challenge is to consolidate a new dimension of cooperation and executiveaction on the political stage. In this reform Spain is seeking to permanentlyconsolidate what have been isolated innovations up to now.

Progress made and challenges pending in development cooperation in 2006

Intermón Oxfam
Isabel Kreisler

According to data from the Development Assistance Committee (DAC) of the OECD, in 2006 Spain increased its official development assistance (ODA) by 20.3% over the 2005 figure. This is a significant rise, and it confirms the upward trend in Spanish foreign assistance and the country’s commitment to reaching the Millennium Development Goals. Spain’s contribution of EUR 3.03 billion (over USD 4.12 billion) put it in eighth place in the ranking of donor countries. In relative terms, this came to 0.32% of gross national income (GNI) in 2006. For the first time Spain contributed more than the mean for DAC donors (although total DAC assistance fell by 5.1% against the previous year, the first ODA decrease since 1997).

These data showing a quantitative increase in ODA are a good sign, but two serious reservations must be borne in mind. First, Spain has not complied with its own timetable for increasing ODA, in which a figure of 0.35% of GNI was set for 2006 as a prior step to reaching 0.5% in 2008. Nor has it complied with the commitment agreed by the European countries to allocate 0.33% of GNI to international cooperation in 2007 (having fallen short by 0.01%). Second, as is the case with the other donor countries and as has happened in previous years, the official figure for ODA has been inflated by debt forgiveness operations. If we considered these amounts separately (as the donors themselves recommended in 2002 in the Monterrey Consensus), Spanish ODA in 2006 would be only 0.28% of GNI.

For Spanish cooperation agencies, another significant development in 2006 has been the large sums contributed to international bodies, mainly to the United Nations system. Again, while this demonstration of a commitment to multilateralism on the part of the government is welcome, the question arises as to whether it can sustain these payments and whether it can obtain guarantees that this assistance is used in the most effective way. What the government has done amounts to handing over a blank cheque without any pre-established strategic framework to supervise how the funds are employed. All in all, the quality of Spanish ODA is still an area that needs serious attention.

Some progress has been made. Like the rest of the DAC donor countries, Spain has formally adopted the commitments stemming from the Paris Declaration, and it has developed sectoral strategies which should help to improve how assistance is managed in the near future. However, as regards the quality of assistance, it is still very worrying that new foreign debt is being generated through mechanisms that are long overdue for reform like Development Assistance Fund (FAD) concessionary credits that are linked to exports by Spanish companies and are counted as ODA, or the
Spanish Export Credit Insurance Company (CESCE) credit insurance schemes.

If the government is to make good on its commitment to international cooperation, and if a coherent development policy is to be sustained, these instruments need urgent reform. Future increases in ODA will have to be met by consolidated expenditure from the national budget and not depend on volatile expedients like forgiving foreign debt or the ability of debtor countries to repay credits, which is how Spain’s obligations to multilateral bodies are being discharged at the present time.


EUROSTAT(2006). Keyfigures on Europe - Statistical pocketbook 2006 - Data 1995-2005. Available from:<epp.eurostat.ec.europa.eu>.

IMSERSOL (Instituto de Mayores y Servicios Sociales) (2004). Atencióna las Personas en Situación de Dependencia en España (Libro Blanco).Ministerio de Trabajo y Asuntos Sociales.

Navarro, V. (2007). “¿La seguridad social en Españaes inviable?” in Nou Cicle, el color delprogrés, magazine online. Availablefrom:<www.noucicle.org/NCarticles/1620.html>.

Sáez, M.J. y Taguas, D. (2007). “LaReforma de las Pensiones” in Envejecimientoy pensiones: La reforma permanente.Revista Panorama Social No. 4, Fundación de Cajas de Ahorro.


[1]From 79.4% in 1997.
[2]Both comparisons take account of the amount of pension received by retiredpersons in comparable situations.
[3]The ratio of the population under 15 years of age and 65 and older to those aged15 to 64.
[4]For example, COM (2001) 362 final, of 3 July 2001.
[5]David Taguas is currently in charge of the Economic Office of the Presidency ofthe Spanish government. The same idea is dealt with in an editorial in El País,“Augurios de crisis”, 12 February 2002.
[6]Vicens Navarro holds the Chair of PublicPolicies at the Pompeu Fabra University, Barcelona, Spain.

Plataforma 2015 y más unites the efforts of 14 Spanish non-governmental development organizations (NGDOs) working to raise awareness and promote change in international policies. It is a member of the Spanish Social Watch coalition.