The government is maneuvering with another accounting fix to comply with Brussels on pensions and ignoring AIReF's warnings about spending.

The government has been maneuvering for months to try to convince Brussels that the pension reform guarantees the system's sustainability. First, it pressured the Independent Authority for Fiscal Responsibility (AIReF) with accounting manipulation to inflate revenues , and although it passed the initial examination, the maneuver generated reluctance from the European Commission. Now, it is attempting to comply with EU demands through a new compromise, but experts warn that it continues to ignore the underlying problem: the formula imposed for calculating expenditure is not a valid indicator for measuring the system's sustainability.

On March 31, the pension reform designed by former Minister of Social Security and current Governor of the Bank of Spain, José Luis Escrivá , passed its first three-year review . In its assessment, the AIReF concluded that it was not necessary to activate the closure clause that would require new adjustments, but warned that it had reached this conclusion after applying a spending rule that "is highly influenced by the time at which it is calculated, shows excessive sensitivity to changes, and offers a partial view of the system's sustainability."

The People's Party (PP) issued a warning to the vice presidents of the European Commission, Valdis Dombrovskis and Raffaele Fitto, who pledged to review the AIReF report. This was a backdrop for a controversial decree approved earlier this year, in which the Ministry of Social Security instructed the Tax Authority to consider state transfers as pension system revenue. This is the diversion of funds made each year to cover the shortfall in tax contributions.

Many experts described this maneuver as an "accounting makeover" to pass the exam and avoid the dreaded adjustments. And now the Ministry, in an "exercise of responsibility and transparency" and "in line with the recommendations of the AIReF and the European Commission," has decided to eliminate the accounting of these transfers as income and request a new review from the Tax Authority.

In any case, in its first assessment, the supervisory body only included a minimal portion of the transfers as measures that actually bolster the system's revenues. Specifically, 0.3 percentage points of the 1.3 percentage point increase in GDP transfers since 2020. Therefore, analysts predict that the new fix the government intends to introduce by decree will not significantly change the outcome of the AIReF review, as the improvement in GDP due to upward revisions in recent years will offset the adjustment.

Fedea researcher and professor of Applied Economics at the URJC, Miguel Ángel García, considers it "a positive step for the European Commission to exert pressure to prevent government interference in the interpretation of the closure clause," but predicts that "the amendment will result in passing the test, but only by a few tenths of GDP," which will allow "society to be sold on the idea that the system guarantees financial sustainability, when the reality is far from that," because "even if the closure clause were fulfilled, a continued and growing deficit would remain."

The underlying problem, therefore, is that despite this new accounting arrangement intended to address the transfer trap, the government continues to ignore the AIReF's main warning regarding the pension spending rule : it is ineffective for the intended purpose. Enrique Devesa, a professor at the University of Valencia and a researcher at IVIE and the Polibienestar Institute, warns: "Ultimately, it's a spending rule, and even if they change something with the new regulations, the saddest thing of all is that it's useless for measuring the sustainability of the pension system."

Despite the elimination of transfers as a source of income, Devesa questions other measures that the Government continues to require to be quantified as income, specifically, "those that affect the number of people required to contribute, as well as reforms to the labor market and other labor or employment regulations that have a structural impact, directly or indirectly, on the income of the public pension system." Regarding this point of the decree, the president of AIReF, Cristina Herrero , already stated during the presentation of the report in March that "assessing the impact of labor or employment measures is a complex task," especially given that the Government itself has not yet published the report on the impact of the labor reform on temporary employment, which it has been due to publish since last January.

In its report, the AIReF also recommended that the government integrate the pension spending rule into the general spending rule of the European fiscal framework to simplify the current complex system. In the new decree, Social Security incorporates this recommendation and is open to standardizing the rules "by incorporating long-term sustainability into the analysis." To this end, it gives the AIReF until June 1, 2026, to submit a new report on the pension reform. However, the formula that determines whether new adjustments to the system are necessary, which the Fiscal Authority has already ruled invalid, remains intact.

The closure clause was agreed with Brussels by former minister Escrivá in March 2023 as a condition to avoid excessive spending deviations after linking pension revaluations to the CPI. More than two years later, the current governor of the Bank of Spain has withdrawn from the debate on the sustainability of the system, stating that the central bank lacks the "technical capacity" to assess it, leaving sole responsibility for the analysis to the AIReF (Spanish National Renewal Fund). Meanwhile, in a context of ongoing evaluation of reforms linked to European funds, the EU authorities have issued a series of recommendations to the Spanish government on this issue, according to the leadership of the current Ministry of Social Security. This has led to the drafting of this new decree "in an exercise of transparency that aims to strengthen confidence in the sustainability of the system," according to sources from the department headed by Elma Saiz.