Retirement at 65 Will Soon Be Retired

Source: El País El retiro a los 65 se jubila pronto

Retirement at 65 Will Soon Be Retired
The government will apply some exceptions in the extension of the retirement age to 67
L. ABELLÁN / M. V. GÓMEZ – Madrid – 12/12/2010

Retirement at 65 years of age is already becoming an anachronism. After months of hesitation, the government has finally set aside euphemisms in the debate over pension reform, the most important of its unfinished business. The reference to 67 years as retirement age has been part of the hidden agenda of the government ever since it was brought up about a year ago. President José Luis Rodríguez Zapatero has never renounced this radical change in the public system, although both he and his ministers have avoided explicitly mentioning it in order to avoid political and social confrontation. But the taboo has ended.

The Ministry of Labor has already profiled a model for reform based on the postponement of retirement age to 67. The only exception that the department is contemplating – one which it hopes to use to attract a significant part of Parliament to agreement – is to make this change flexible in some cases. Although it isn’t a closed issue, the most plausible alternatives consist in exempting some laborers with especially painful jobs and those who have contributed to the system longer.

The biggest unknown is the degree of flexibility that the Ministry of the Economy is prepared to allow. The Ministry of Labor has always favored seeking effective alternatives to a generalized postponement, but the Vice President and Minister of the Economy, Elena Salgado, has clearly promised Brussels and other parties disturbed about the future of Spain that working age will be extended to 67. No alternative would be as eye-catching. Countries like Germany, England, and Denmark have already postponed retirement age themselves.

“The key is that the administration can tell that and show that to Brussels,” reflected Carles Campuzano, spokesman for [Catalan party] CiU in the Pact of Toledo [a parliamentary panel on pension reform]. Together with the [Basque] PNV, this party is key to the parliamentary agreement that the executive has not given up hope on achieving. Officially, the government is working under the hypothesis of the pact, but the possibility of failure is ever stronger. If no one remedies that, the mark on pensions will follow the outline of labor reform, in which the opportunities for agreement were pushed aside until the very end without any results. Conscious that the markets are avidly watching for signs of reform, the Executive Branch has moved up the deadline twice in the last few weeks, with the intent of canceling the delay on the original deadline: December 2010.

January 28 is not just any day. It will mark one year since Zapatero proposed to elevate Spaniards’ active labor life to 67. It is more than sufficiently far away to achieve an agreement – or to agree on disagreement – with Parliament. In spite of everything, some political groups are perturbed by the ultimatum they’ve received. “It’s the first time that they’ve given us conditions and a deadline. It’s never been demanded before. It seems like a bad precedent,” said Tomás Burgos, spokesman for the [opposition] Popular Party on the committee of the Pact of Toledo, which since 1995 has been the basis for pension reform.

Burgos failed to mention that this is also the first time Spain has been under international scrutiny and that its investors have insistently demanded that it undertake reforms to inspire confidence. Pension reform tops the list, even though after more than two years of crisis, Social Security has continued to run a surplus. Parliament has not internalized the exceptional nature of the situation, and about a year after receiving the official proposal, the Pact of Toledo has not analyzed the thorniest issues: retirement age, the periods of time used to calculate one’s pension and to become eligible for it, assistance for widows…with luck, the crucial debate will begin next week.

“The government has already changed the calendar, and it proposed [in this week’s meeting] that we go right to debating the pension age. But there wasn’t agreement,” explained Gaspar Llamazares of the United Left, who asks if the government is “using the Pact of Toledo to protect appearances” and will later ignore it when proposing a policy.

This theory threatens the very survival of the Pact of Toledo, a group that over 15 years has successfully taken pensions off the table of electoral politics and provided stability to the system. The spokesman for the PNV in the commission, Emilio Olabarría, said that if there is not agreement on the final project – “or the Executive already has one in mind” – it will be far from parliamentary recommendations, and so the forum would have no reason for being. “The Pact of Toledo would be paid off,” he concluded. Despite his words, Olabarría has shown he is one of the most open to negotiation. “We’re ready to talk about anything,” he assured.

The Pact of Toledo is getting down to business and preparing to release a text before Christmas. “If not, it wouldn’t be completing its mandate from the government,” say sources in the Executive Branch. The greatest responsibility for the mandate would fall on the [ruling] Socialists, who show a surprising optimism: “There is going to be a good accord, probably on the 24th of December,” predicted Isabel López i Chamosa, Socialist Spokesman on the commission.

But the key to consensus with the group is far from known by everyone. Not only the government but also the Socialist representatives are hoping for a generalized text that can agree with whatever Zapatero is planning. Llamazares called this the Romanones formula: make yourself a law and leave me the regulations. Not only this representative but also the Popular Party is firmly opposed to any ambiguity. With these conditions, it will be difficult to square the circle: a text that alludes to the legal retirement age without explicitly raising it.

If negotiation with Parliament is complex, then with labor unions it is practically impossible. With the acceleration of its plans, the administration has left only days to discuss the project with the Skilled Workers’ and General Workers’ Unions, conscious that there is little room for dialogue. The unions will probably incite a second wave of demonstrations, and the reaction to pension reform will be as energetic as the one against labor reform.

Key Elements for the Pact of Toledo
Retirement at age 67. This is the most concrete point of the proposal the administration sent parliament at the beginning of the year. The measure was rejected by some political groups (principally the Popular Party and the United Left). The Executive is disposed to bring it forward again with modifications. The administration is confident that the draft of the Pact of Toledo will not be very concrete so there is margin to approve its project without contradicting that parliamentary commission.

Period of Calculation. This is one of the aspects with the most consensus. For now, income from the last 15 years of labor is used to calculate the quantity of the future pension. The administration has spoken of increasing the period to 20 or 25 years. This measure would cut pensions for the great majority of workers.

Complete Pension. At the time of retirement, one must have worked 35 years to receive the complete pension. One possibility that would cause a delay in retirement is to increase that number. The administration seems to have ruled out, for the moment, raising this threshold.

Minimum Demanded. To make a claim for a partial pension, it is necessary to have worked for at least 15 years. Increasing this period is one of the points that seems to have the most parliamentary support, although it would depend on the conditions demanded.

Widows’ Pension. The Pact of Toledo championed reformulating this system for future generations in 2003. For now, the most probable option is to aim for greater equilibrium between the pensions of widows and orphans, if only a little.

Labor Funds. The administration intends to modify the differences between its plan for labor accident funds and those of other groups, most of all the PP, PNV, and CiU.

Suspension of Benefits. The decision of the administration to freeze benefits for 2011 has poisoned the parliamentary debate. The ministry admitted to the representatives last week that this decision legally violated the Pact of Toledo.

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