SPAIN - Rodrigo Rato, the head of the International Monetary Fund and former Spanish finance minister, has warned the Spanish government to keep an eye on the public pension system.
Rato recognised the value of the Pact of Toledo, the cross party agreement which governs the Spanish pension system, but he said that the government needs to remain vigilant at all times.
“In Spain we have an agreement in place since 1995 which is a strong basis for the pension system, but we always need to be focussed on the demographics,” he said in an interview on Cadena Ser, Spain’s leading morning current affairs programme. “We need to monitor the situation constantly if we are to avoid having to take radical and traumatic measures at some point in the future.”
Despite the fact that analysts predict future deficits for the public pension system in Spain, there is a consensus among politicians across the political spectrum that the system is stronger now that it has ever been and that PAYG model is the best one to take the country forward.
Rato was the Spanish finance minister until last March when the centre right government of José María Aznar was defeated by the Socialist Party.
He recognised that the public pension system is in a strong position but he suggested that the recent rise in public pension payments, as well as other spending increases that the Socialist government has introduced, could jeopardise the public finances in future.
“It’s very important that the government maintains budgetary stability,” he said. “Otherwise we will be charging the clouds in the skies over future generations.”