Economist warns Spain lacks funds for February pensions

Economist warns: No funds for February pension payments

Economist José Carlos Díez bluntly stated that there is no money to pay February's pensions. One month. And his question—what is the plan?—answered itself: there is no plan. The paradox is that on the very day this diagnosis circulated, the government raised non-contributory pensions by 11%. Two facts that do not fit together, and which quite well summarize the state of the system.

The issue is not new. It has been on the table for years, with forecasts ranging from imminent collapse to "we'll see." What changes now is the tone: it is no longer a matter of whether the system holds up, but how many months remain before someone must make an unpopular decision.

Why is it said there is no money for February pensions?

Pension payroll is paid monthly from the Budget, and when social security contributions fall short, it is covered by debt. This is not an anomaly: it has been the standard mechanism for years. What supports the diagnosis is that the deficit has become structural and maneuvering room is narrowing.

Some summarize it as: issue debt and fix it. Others add the important nuance: debt is one thing, interest is another. When interest grows, it creates a hole in the budget because, unless a default is declared, other items must be cut or revenue raised. The example cited is France, where interest would already be the first item in the budget.

The discussion about the 11% increase in non-contributory pensions adds noise. It is pointed out that this increase still needs to be applied and that there are benefits—for example, orphan allowances, and perhaps the minimum vital income—where the rise has not been reflected. Without extraordinary income in January, it is unclear how the increase is balanced.

Unlimited money and the bill nobody wants to pay

The other current of analysis argues that money is not a scarce resource: the State creates it and it is, by definition, unlimited. Under that logic, saying there is no money for pensions is as absurd as a math teacher saying they cannot teach because they have run out of numbers. The real limit would not be money, but the inflation generated by creating it without restraint.

The counterargument is that this ability to create money does not eliminate the restriction: it shifts it. If money is issued to pay pensions, the adjustment comes through another channel—prices, rates, debt—and someone pays for it. Therefore, the discussion is not whether it can be paid, but who bears the cost and when. And nobody wants to sign off on that.

The generation leaving and the one stuck with the bill

One of the most repeated arguments concerns intergenerational distribution. It is argued that a generation retiring with substantial assets and healthy bank accounts will ruin subsequent generations for decades by refusing to accept a one-third reduction in their pension. The analogy used is giving a 70-year-old a credit card at their children's expense, with minimum payments over 40 years.

The parallel with housing appears naturally: the same generation that accessed cheap homes thanks to massive construction permits now makes it difficult to build. The conclusion drawn is that the problem is not cash flow, but incentives: nobody receiving benefits has a reason to give anything up.

When does it break? The timelines being discussed

Predictions group into two blocks. Those who believe the system holds as long as someone signs more debt, and those who place the inflection point in a specific horizon: 2026 as the year the deficit starts to be felt, 2027-2028 as the period when it becomes truly visible. The underlying idea is that the gum is stretched too far and gives no more.

There are also those who recall that collapse prophecies have failed for decades. An opinion article from 1991 is cited that already announced the bankruptcy of the public pension system before the year 2000, signed moreover by the president of the banking association. The skeptical conclusion is that doom-sayers are as wrong as optimists, and that the system keeps paying because someone always appears to sign.

The adjustment nobody puts on the table

The most obvious solution—lowering pensions—will not be proposed by any politician, because the electoral cost is immediate and the benefit belongs to others. It is noted that the next person to arrive will say let the one behind drive. And that the debt ceiling is changed whenever necessary, without further ceremony.

Another route mentioned is raising contributions, with an additional tax on workers' wages, similar to what is done in Sweden. It is a technically viable but politically uncomfortable option: the cost falls on those who work, not those who receive benefits. And that distribution is not peaceful either.

Meanwhile, February's payroll will be paid. And March's. And April's. The problem is not next month, but the one after that. How many Februars remain before someone must choose between cutting, raising taxes, or issuing until the market says enough?