Social Security ends year in red for first time since 1999

The Social Security system ended 2011 with a deficit of 668 million euros, or 0.06 percent of Spain's GDP, said Deputy Prime Minister Soraya Sáenz de Santamaría. The result is a far cry from the 0.4-percent surplus that the previous Socialist government had forecast in the state budget, and Santamaría said this is further proof that the economic situation is "more difficult" than had been thought.

This is the first negative gap between revenues and expenditures in the Spanish pension system since 1999, when Social Security stopped financing public healthcare (which is now paid for with taxes). The sustained destruction of jobs in 2011 shrank worker contributions to the system, while more and higher pensions made a bigger dent on the expense side.

Santamaría admitted that the previous secretary of state for Social Security, Octavio Granado, had warned the incoming government that he thought it would very difficult to keep a surplus by year's end; but she also added that the new Popular Party (PP) administration did not quite expect such a different result.

The Social Security figures, the first item in the 2011 public accounts to be released, helped Santamaría justify a set of "tougher" austerity measures than initially planned by the PP, such as last week's surprise income-tax hike. However, it bears reminding that the bulk of the public deficit overshoot is not due to the Social Security system but to regional governments' miscalculations, as Economy Minister Luis de Guindos noted.