Cutting Spanish public sector bonuses saves €20bn

Extra pay for pensions and civil servants costs over €20 billion

The extra payments for pensions and public employees are nearing their end. Eliminating them would save more than €20,000 million per year, making this double monthly payment the most attractive adjustment among those circulating. The problem, as almost always, is who signs off on it, when they announce it, and who bears the brunt. Because the menu of cuts has been written for some time, but no one wants to be the one to set the table.

What cuts are being considered?

The list is short and well-known: extras for civil servants and pensioners, freezing replacement hiring for retiring public employees, slashing public investment, pressure on subcontracting, and raising taxes on diesel and tolls. The double payment for pensions alone amounts to around €12,000 million, according to calculations used by pensioners in their usual forums.

Some argue that the cut will be phased in so it goes unnoticed: removing one extra payment and splitting the remaining one into two installments, so that the pensioner receives the same amount for a few months and then simply receives less. Another school of thought sees it as unnecessary, trusting that the economic cycle will hold up. The first hypothesis has precedents. The second does not.

Debt at 120% of GDP: the figure forcing cuts

The magnitude that dictates everything else is debt. Against 120% debt-to-GDP ratio, the EU target for 2030 stands at 60%. This gap translates, according to circulating estimates, into the need to cut €15,000 million annually starting immediately. And without waiting for anyone to ask in writing: the European Commission demands spending reductions, not specific chapters. Choose whom you anger.

To this is added an accounting detail often forgotten: the Social Security system owed €116,000 million as of December 31, 2023, and contributions do not fully cover current pensions. In other words, the system is no longer self-financed solely by payroll contributions, but by general taxes. When someone says pensions are guaranteed, it is worth asking with which budget line.

The precedent of Greece and Italy regarding extra pay

Removing an extra payment is not eccentricity. In Italy, the quattordicesima (fourteenth month) was scrapped years ago, leaving only the tredicesima (Christmas bonus), albeit with cuts. In Greece, extras and supplements were manipulated, resulting in an actual drop of between 15% and 20% in pensions, not the total dismantling that was reported. The difference is important: the narrative of the ruined country was used here to justify things that never peine there.

In fact, the largest cut in the history of Spanish pensions has a date and signature: 1985, when the Socialist government changed benefit calculations and the Minister of Labor resigned over it. The second came with the 2011 reform and Article 135 of the Constitution. Let everyone draw their own conclusions about who cuts when times get tough.

Retirement at 67 and 38 years contributed: the fine print

The rule change has already peine and hardly anyone has internalized it. Retirement age moves from 65 to 67 years, more than 38 years of contributions are required to receive 100%, and the entire working life is intended to be calculated. For those who started working at 20, it is bearable. For those who have chained temporary contracts, faced two crises, and had some undeclared work years, it is a horizon that never arrives.

There lies the demographic trap: half the generation under 40 will never be able to prove those years. And the system that promises a double payment to those already inside will not have the funds to pay those coming behind. This is not an opinion: it is the arithmetic derived from the previous figures.

Civil servants, interim staff, and the silent adjustment

The cleanest adjustment is not announced: it dies by starvation. Not replacing public employees who retire in the coming years reduces spending without photos or headlines, and this was done during the period of budgetary control in local administrations. By not renewing interim staff, many administrations save an entire budget line without touching a law.

Another flank is discussed with less modesty: lowering salaries in local and regional administrations to match those of the General State Administration. A regional police officer and a national police officer do not earn the same for doing the same job, and there is savings waiting for someone to dare. However, it is worth remembering that a public employee earning €1,400 or €1,500 a month is, in practice, a working poor person sharing a flat.

Who pays the bill

Regarding Europe's role, there is a useful confusion: Brussels is blamed for demanding specific cuts when in reality it only asks to reduce total spending and deficit. How it is done is up to each Government, and that margin is exactly what allows deciding whose pocket gets hit. With ten million voters willing to vote regardless and a majority of pensioners in that bracket, the choice makes itself.

Part of the analysis goes further, pointing out that a portion of social spending is dispersed in direct aid, housing, utilities, and food cards distributed by local and regional administrations, without a unified accounting chapter. Quantifying it is nearly impossible, and precisely for that reason, it never enters serious debate.

What does enter, and with increasing force, is the feeling that rules changed for everyone except a few who still retire at 60 with 100%. That asymmetry is what turns a technical adjustment into a political problem.

If the schedule holds, the first visible slash will come via extras, probably after the next elections and with the argument of system sustainability. What no one has explained yet is how to sustain a system that promises 14 payments to some while requiring 38 years of contributions from others. The cut may be announced at the end of the year. It may be delayed. What will not happen is that the money appears on its own.