Spanish government moves to re-index pensions payments to CPI

Pushed by the new Socialist government in power, Spanish lawmakers have agreed to link annual public pension payments to consumer price inflation.

According to multiple reports, a consensus was reached within the multi-party committee charged with modifications to the public pensions system, known as the 'Toledo Committee', on indexing the country's pensions payments to Spain's CPI during years of economic growth.

However, no agreement was reached on whether that should be the case during recessions or episodes of economic crisis.

One option that had been tabled was to safeguard only the lowest pensions during such episodes, with the highest ones being compensated during the years of plenty for the resulting loss of purchasing power.

With the public pensions system under strain, and given the need to secure the sustainability of the country's public accounts, starting from 2014 the prior centre-right government had established annual rises of only 0.25% during the country's recent crisis.

However, having regained stability and cognisant of the need to maintain public support for recent economic reforms, it had agreed to re-index pensions payments to CPI in 2018 and 2019.

Yet there were some concerns that the new government in Madrid and its regional backers might go too far, in a classic pre-election attempt to curry favour with voters, ahead of the regional elections scheduled for 2019 and the general elections in 2020.

There had also been some signals from top officials in Madrid in days prior - which were quickly criticised by some economists - that tax rises might be on the cards to help foot the bill.