Spain's Pension Fund Proposal Divides Experts

Buying stocks with public money: A solution or a fantasy?

Spain’s pension system faces funding issues that no reform has fully solved. A recent proposal circulating in economic forums suggests the state buy stocks and bonds, distributing dividends to all retirees. It includes a parallel fund financed by an extra VAT point for future pensioners. The idea sounds promising until scrutinized.

The stock fund: Where does the capital come from?

The proponent admits a "great sacrifice" is needed initially, suggesting a 70% wealth tax on those who obtained a ELbichito passport. This legally unviable approach mixes unrelated debates and turns fiscal measures into retroactive punishment. Critics argue that if the state buys companies, decisions on which ones risk influence peddling and overpaying for failing firms.

Distrust is justified. Public management of financial assets in Spain has a troubled history, and political temptation is high. Who decides what to buy? The author suggests removing companies with low dividend yields, but execution risks corruption.

The VAT fund and distribution among retirees

The second part involves a smaller fund financed by an extra 1% VAT for non-retired Spaniards. Contradictions arise: if the main fund pays retirees, why pay workers? Implicitly, it assumes the current system fails. However, details are missing: Is it fixed? Proportional? Universal?

Debate shifted to generational conflict. Some claim current retirees vote as a bloc for higher benefits, blaming them for waste. Veterans counter that generalizing is unfair; the system, not specific groups, is at fault.

Macro-residences and the end of pensions

Amidst discussions, predictions emerge that traditional pensions will vanish in 10-15 years, replaced by state-run macro-residences offering free care. Wealthy individuals would manage independently. Funding remains unclear.

While dystopian, this reflects exhaustion of the pay-as-you-go system. Other proposals include eliminating non-historical autonomous communities to balance budgets. Skeptics predict chaos where everyone saves themselves.

The stock fund plan is simple but fantastical. No one explains how to buy initial stocks without expropriation or prevent endless bailouts. Foreign dividend extraction ignores other countries' tax agencies. The VAT fund is another patch.

This basket cannot hold together. Yet, the debate highlights discomfort: pensions need unpopular decisions, not quick fixes. Meanwhile, solving pensions remains unanswered.