Spain to freeze pensions, reduce retirement age

Share | (Barcelona) - The Spanish government is debating on Friday over the set of austerity measures, which need to be implemented in order to reduce spending and to meet the conditions of a potential EU rescue program. The steps discussed include a rise of the retirement age as well as a pension freeze.

According to sources familiar with the matter, Spanish authorities have already decided to push through with the hike of the retirement age from 65 to 67 over a 15-year span. The abolishing of the annual pension increase is still being debated though. The final decision and the final approval of the austerity package is supposed to take place on September 27, according to Deputy Prime Minister María Soraya Sáenz de Santamaría.

Should the debated measures be implemented, they would bring savings of approximately 4 billion euros and The Spanish government would also assure investors this way of their determination to carry out the structural reforms, despite the delay.

Capital Economics team of analysts believe that the time is ripe for Spain to formally request a EU bailout: "So far at least, the Spanish Government's decision to delay seeking a bail-out does not seem to have backfired. After all, Spanish government bond yields remain low by recent standards. But the Government would be unwise to wait too much longer. After all, if markets were to conclude that the ECB's OMT programme might not ever be used, Spanish yields could quickly shoot back up to their summer highs. In such a scenario, Spain would suddenly find itself in a much weaker bargaining position to negotiate favourable conditions on a bail-out."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Forex and Currencies

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