Spain’s government said yesterday it had agreed to raise the retirement age to 67 from 65, a bitterly fought reform aimed at repairing public finances and soothing financial markets.
Closely watched by investors as a sign of Madrid’s determination to keep long-term spending on track, the outline deal was reached after one-and-a-half months of talks with unions and business chiefs.
An agreement between the government and the country’s two major unions, UGT and the CCOO, was reached in the early hours of the morning ahead of a cabinet meeting.
“The deal is important,” Deputy Prime Minister Alfredo Perez Rubalcaba told a news conference after the cabinet meeting approved the scheme.
“It seeks to confront the great problem of Spanish society: economic recovery and job creation, that is the heart of it,” he said on a day Spain announced a 13-year record unemployment rate of 20.33 per cent at the end of 2010.
Under the outline agreement, the retirement age will be gradually raised from 65 to 67, offering a full pension for 37 years of contributions. But there is a list of exceptions:
• Retirement before 67 for workers in dangerous or arduous jobs.
• Full pension at 65 for workers with 38 and a half years of contributions, and lower pensions for those who retire at 65 with fewer contributions.
• Early retirement from 63 but with a lower pension for those who have at least 33 years of contributions. And retirement from 61 in “crisis situations” for those with at least 33 years of contributions, also at less than full pension.
• A credit of two years’ contributions for women who stop work to look after their children.
The reform will be implemented between 2013 and 2027, with an extra month of contributions each year for the first six years, and an extra two months a year of contributions thereafter.
An agreement on social welfare including pensions will be signed February 2 by the government, unions and business.
“This is definitely a praiseworthy and politically difficult step,” London-based Citi European Economics analyst Giada Giani said in a report.
“However, the phasing-in period for these changes is extremely long while pension spending pressures will start rising already in this decade,” she added.