CORONAVIRUS

Spain releases €30.5 billion to relieve strained social security system

This is the second time that the government has allocated money to make up for the drop in contributions caused by the coronavirus crisis

Finance Minister María Jesús Montero at a news conference on Tuesday.
Finance Minister María Jesús Montero at a news conference on Tuesday.Eduardo Parra / Europa Press

In Spain, the effects of the coronavirus are also being felt by the social security system, where the number of contributors has declined while jobless claims have soared.

On Tuesday, the Cabinet approved an extraordinary outlay of €30.5 billion that will go towards paying pensions (€14 billion) as well as unemployment checks and subsidies (€16.5 billion).

Also on Tuesday, Finance Minister María Jesús Montero announced that the new guaranteed minimum income scheme, meant to help households at risk of poverty, will be approved on Friday.

Fund injection

This is the second time since the coronavirus crisis began that the Spanish executive has allocated money to shore up the social protection system. On April 14 the coalition government led by Pedro Sánchez, of the Socialist Party (PSOE), approved an early credit of €13.8 billion.

In previous years, when the economy and the job market were growing at a fast pace, this type of transfer was typically done well into the month of June, to deal with the extra pension payments of July.

But the economic slowdown caused by the confinement measures has affected millions of workers in Spain. Around 950,000 had been laid off by late April, while 3.4 million had been placed on a furlough scheme known as ERTE. And another 1.4 million were self-employed workers who have filed for government aid after being forced to shut down their businesses.

Neither the self-employed workers, nor the vast majority of the furloughed employees, are now paying into the social security system.

On the other hand, the Covid-19 crisis has also reduced the number of people claiming pension benefits. One of the reasons is that the disease has been especially lethal among the older population. Another one is that there have been fewer applications for retirement benefits during the confinement. In May, the system paid out 9,754,137 pensions, a 38,508 drop from April, for a total amount of €9.85 billion, or 0.27% less than in April. This is the third month in a row that the number of pension claims has declined.

English version by Susana Urra.

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