I previously pointed out what seems as Ponzi financing scheme where the Spanish government has raided its pension reserve fund in order to boost Spanish bonds or to lower bonds yields, by buying up to government debt up to 97% share of its assets.
For the cash strapped Spanish government, this hasn’t been enough, as they squeeze money from the social security fund to finance state pension.
According to a report from Reuters:
Spain tapped its social security reserve fund for the second time in a month on Monday, the Labour Ministry said, to help with extra summer pension payments as unemployment and retirement costs deplete government funds.The government turned to the fund for 3.5 billion euros ($4.6 billion) on July 1 then for a further 1 billion euros on Monday. Spanish pensioners receive two cheques in summer and two over the Christmas holidays.Spain was forced to tap the reserve for the first time last year to help pay pension costs, using some 7 billion euros.Record high unemployment, which hit over 27 percent in the first quarter, and a growing number of retirees on a state pensions have put an unprecedented strain on Spanish social security funds.
Social security or pension funds have become a favorite tap for governments, especially for the cash strapped variety. These funds are not only subject to to government’s predation, they can also be used as instruments to effect political agenda. For instance, in the Philippines, government retirement fund the GSIS has been used as a tool to promote the popularity of the incumbent government via stock market purchases. Not only does the GSIS intervene directly via actual purchases, they also provide signaling mechanism to the marketplace by pledging to buy stocks at certain levels.
And like the Detroit saga, if the Spanish government defaults on their debt, pension fund beneficiaries will get cleaned out.
It’s sad to know how government tapping of or dabbling with people’s savings would eventually lead to hardships.
No comments:
Post a Comment