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Spain’s new coalition government just raised pensions

Spain's new leftist coalition government approved raising pensions this year in line with inflation during its first cabinet meeting on Tuesday, Prime Minister Pedro Sanchez said.

Published: 14 January 2020 17:05 CET

Spain's new coalition government just raised pensions

Spain's Prime Minister Pedro Sanchez poses for a family picture with ministers of his coalition government. Photo: AFP

The country's 11 million pensioners will see their pensions rise by 0.9 percent in 2020, the expected inflation rate for the year, to ensure they “do not lose purchasing power,” the Socialist leader told a news conference after the measure was approved.

If the inflation rate ends up being higher than 0.9 percent, pensioners will receive a payment in early 2021 to make up the difference, he added.

Pensions in Spain stopped being linked to inflation in 2014 as part of austerity measures introduced by Sanchez's conservative predecessor during the country's financial crisis.

Raising pensions in line with inflation was one of the measures included in the coalition agreement signed between Sanchez's Socialists and anti-austerity party Podemos following a repeat November general election.

Sanchez, in power since June 2018, was sworn in again as prime minister last week, becoming the head of Spain's first coalition government since the 1930s.

Pensioners have staged regular street protests in recent years to demand higher pensions.

Spain's ageing population and falling birth rate has sparked concerns of a potential pensions time bomb and calls for a reform of the system.

Sanchez said his government would work to ensure the pensions system is “sustainable”.

He also said his government would renegotiate with Brussels its deficit targets for the coming years, after agreeing on a package of measures with Podemos which will boost public spending, and a new increase in the minimum wage.

“There is a new political as well as economic reality, so we have to negotiate with them this new path of stability,” Sanchez said.

His government estimates Spain's public deficit came in at around 2.0 percent of economic output last year and has set a target for it to come down to 1.7 percent this year.

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Pension reform, investment, new jobs - Macron unveils France's post-Covid recovery plan

A nurse watches Macron's TV address on Monday. Photo: JEAN-FRANCOIS MONIER / AFP.

Obligatory vaccines and the extension of the health pass made the headlines following Macron’s live TV address on Monday evening, but the President also sketched out his vision for France’s post-Covid economy.

Some of the measures he announced represent a return to the priorities he set at the beginning of his tenure, while others have been shaped by the pandemic.

Pension reform

There had been much speculation about a return of controversial plans to reform France’s retirement system, which were shelved at the start of the pandemic.

Macron confirmed that he planned to raise the retirement age – most people can currently retire at 62, but a number of ministers have been pushing to raise the legal minimum to 64.

READ ALSO France to tackle fourth Covid wave with stricter border controls, health passports and compulsory vaccines

“Because we are living longer, we will have to work longer, and retire later,” Macron said. “Not tomorrow, not brutally, and not in a uniform way because we will take the difficulty of a job into consideration.”

The government will begin consultations with workers and employers in September, but “will not undertake the reform so long as the epidemic is not under control and the recovery guaranteed,” Macron said.

This could mean his plans are not implemented before the presidential election in April 2022.

Macron also returned to a controversial point from the 2019 reform plan which lead to widespread protests: the abolition of the country’s 42 different pension regimes, which currently mean many public-sector workers can retire early. Under the new plans, these special regimes will be abolished for new employees, but people currently employed can keep the generous exceptions.

EXPLAINED: What are France’s special pension regimes?

The plan also includes a minimum pension of €1,000 per month after a full career. “A life of work must offer a dignified pension,” Macron said.

Unemployment reform

Changes to unemployment benefits will be “fully implemented” on October 1st. The reform was supposed to come into effect on July 1st, but in June, France’s Council of State decided to suspend certain elements regarding the way benefits are calculated.

“Uncertainties around the economic situation do not allow for implementing, at this moment, these new rules which are meant to support job stability by making benefits less attractive for workers alternating between short contracts and inactivity,” that decision stated.

“In France, you must earn a better living by working than by staying at home, which is currently not always the case,” Macron said on Tuesday.

From September, the government will also launch “a massive plan for the training and retraining of the long-term unemployed”.

“We have seen during this crisis the strength of our social model,” Macron said. “It’s a jewel we need to preserve. This social model rests on one foundation: work.”

Investment plan

During his address, Macron also emphasised the importance of economic sovereignty, and said an investment plan would be unveiled in the autumn following consultations this summer. The objective is “to build the France of 2030”, and to “reindustrialise, reconcile growth with ecological production”.

“We saw during this crisis the consequences of dependence,” Macron said, calling for French and European independence with regards to technology and primary resources.

Last month, the President announced a series of measures designed to stimulate French innovation in healthcare technology.

Support for young and old

Finally, Macron announced additional support for those who have been hardest hit by the pandemic – young people “who sacrificed so much even though there was little risk for themselves”, and elderly people “who more than others feared for their lives”.

In September, the government will unveil a new revenu d’engagement (commitment-based income) for young people not in education, employment or training. This “will be founded on rights and responsibilities”. This could resemble the garantie jeunes, a monthly benefit for 16 to 25-year-olds not in employment or training, created under François Hollande’s government.

For the older generation, Macron avoided specifics. “We owe them a great humanist ambition for independence, strengthened home care, modernised retirement homes,” he said.

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