Alexa
  • Directory of Taiwan

Spain set to up retirement age to 67 amid crisis

Spain set to up retirement age to 67 amid crisis

Spain took big steps Thursday to restore investor confidence in its fragile economy, saying it is on the verge of a deal with labor unions to raise the retirement age, just as a large savings bank announced it will transform itself into a listed company on the nation's stock exchange.
The moves were seen as significant measures forced by the country's Socialist government to boost credibility among investors who have feared for months that Spain could wind up as another victim of Europe's debt crisis _ one that would be too expensive for the euro zone to bail out.
But analysts said the economic shock therapy being imposed by the administration of Prime Minister Jose Luis Rodriguez Zapatero will translate into a high cost for his party in upcoming regional elections, coming after a host of other austerity impositions that have slashed government spending and civil servants' pay while raising taxes.
Spain's Socialists will likely "suffer an electoral implosion in regional and local elections in May. However, Zapatero expects that if the bailout is avoided and the economic situation improves, the (Socialists) will still have a chance in the national elections set for 2012," said Antonio Barroso, a Europe analyst for the Eurasia Group consulting firm.
A spokesman for Zapatero's office told The Associated Press on Thursday that negotiators were very close to sealing the retirement age agreement, a day before the date the government has set for boosting it from 65 to 67. He declined to provide further details and spoke on condition of anonymity in keeping with government policy, but the Labor Ministry said Thursday that a preliminary agreement had been reached that would avert a general strike.
Separately, Barcelona-based La Caixa, one of Europe's leading savings banks, said it will convert itself into a full-blown bank with traded shares by transferring its banking operations to Criteria, its listed industrial holding group.
La Caixa said in a statement that it will complete the transformation by August, and meet new bank reserve rules called Basel III determined last year by major banks meeting in Switzerland. Spain's economy minister had warned Monday that savings banks failing to meet the requirements could face partial nationalization.
The government has promised to approve a pension reform bill on Friday seen as a crucial element of Spain's attempt to shore up its public finances and make structural reforms as it struggles to emerge from recession and unemployment of nearly 20 percent.
As Spain battles joblessness and grim economic prospects, it must also reduce its swollen deficit and has come under fierce pressure from bond investors in recent months over concern it may be unable to handle its debt and would need a bailout like Ireland and Greece.
El Pais newspaper said the two main unions agreed to accept the age change but demand that people who have worked for 38.5 years must be able to retire at 65 with full benefits. The government had insisted on 41 years of work to receive full pension benefits at age 65. Under the current law, workers pay into the system for 35 years to achieve full benefits at age 65.
Under the government plan, workers who do not fulfill the new requirements for a full pension at 65 will have to work at least 37 years, then retire at age 67 with full benefits.
The move by La Caixa marks the biggest impact so far for the government's push to reorganize its savings banks beset by bad loans after a real estate boom went bust.
Although La Caixa is not believed to have serious problems, Spain's savings banks, known as "cajas," have long been the seen as the weakest link in its financial system. The bank's move could prompt others to follow suit.
La Caixa made its announcement just days after the government announced plans forcing savings banks to meet a core capital ratio of between 9 and 10 percent, up from the current 6 percent.
La Caixa said in its statement its core capital rate will be 10.9 percent, up from 8.6 percent, and that it will rename itself as CaixaBank.
The government estimates Spain's saving banks will need (EURO)20 billion ($27 billion) in new capital but many analysts believe the amount is too low.
Spain's benchmark stock index closed up 1.5 percent Thursday following news of the retirement age deal, and the index has made health gains in recent weeks on speculation that the government's effort to avoid a bailout will pan out.
But Barroso said Zapatero, who has already seen his popularity plunge, will end up "even more unpopular."
While his party almost certainly faces a thrashing in the May elections, the political cost of a bailout for Spain would be much higher and hurt Zapatero's Socialists for years, he said.
"If a bailout is avoided, and the economy starts to recover, the (Socialists) could still have a chance to at least limit the damage in next year's national election," Barroso said.
___
Ciaran Giles contributed to this report from Madrid.


Updated : 2021-05-18 20:19 GMT+08:00