The IMF warns Spain that the increase in social spending must be sustainable

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The International Monetary Fund affirms that the level of social spending in Spain is below the average of its comparable in several categories and that in many aspects it is not efficient, given that, for example, the country has a child poverty rate The highest in Western Europe and its levels of inequality are also higher than in other countries of the European Union. But, as recommended by the IMF, «Any strategy that involves the expansion of social spending would need to be financed in a sustainable way, particularly in a context of high public debt in Spain». In addition, he says that social spending should not displace other investments, such as infrastructure, which are also crucial to promote inclusive growth.

In its report “Effectiveness and equity in social spending: the case of Spain”, the IMF states that, given the social problems and weaknesses in the system, both fiscal margin and organization of the Administration, it would be «Valuable to evaluate the results, adequacy and effectiveness of social spending». “International experience shows that a more efficient provision of public spending could produce better results or create additional resources to improve results where social indicators have a particularly weak performance,” the report reads.

The IMF, to increase the effectiveness of social assistance, suggests improve coordination between different administrations, in view of the high decentralization of the country, and recover the dialogue on the necessary reforms. Encourages reducing duplicities and improving their mobility between regions.

But also considers that more efficient social spending cannot be the only tool to raise living standards and reduce inequality. According to the IMF, efforts must also be made because the labor market is more inclusive. And it focuses on the high rate of temporary employment, which is associated with high employment volatility, low productivity growth and rising income inequality. And, in this matter, it makes a wink to the single contract: “The significant gap in the costs of dismissal between permanent and temporary workers remains the reason why employers offer few indefinite contracts.” The last line of the IMF report is a Austrian backpack backing.

Efficient sanitary system

Speaking by item, the agency states that The “bright spot” of Spanish social protection resides in a health system that works efficiently.

But it points out weaknesses in other spending matters. For example, in the public pension system: although it has so far offered high replacement rates with a reasonable level of expenditure on GDP, which has resulted in a low poverty rate among the elderly, in view of the aging of the population, it considers that the maintenance of this pension system is unsustainable without introducing draft reforms. The IMF points out that, in principle, the full application of the 2011 and 2013 reforms should keep pension spending under control, although it acknowledges that this would imply a decrease in its amount, which has not proved, for the moment, something socially acceptable, so the calculation of its revaluation, for example, has been linked back to the CPI. This type of deviation from the mandate of the reforms has led to the increase in pension spending by between three or four GDP points until the year 2050. This implies significant pressure on public spending in the medium and long term in a context in which the public debt is very close to one hundred percent of GDP. According to the IMF, to ensure the sustainability of the public pension system Measures should be taken to encourage later retirement, increase system revenues without raising social contributions and encourage complementary savings.

Another weak point observed by the organism lies in the unemployment coverage. This is because the high expenditure linked to this item reflects the high structural unemployment, which, according to the IMF, reflects that there are problems of adjustment between the supply and demand for employment and suggests that the cause is in the training, which considers that it is necessary to improve to ensure better levels of occupation. But, for the rest, the IMF points out that the Spanish unemployment protection system is widely adequate. “The levels and duration are considered according to some fairly generous estimates,” says the report.

Spain fails more in the fight against social exclusion, investment in family and housing, whose budget is around 1.6% of GDP, a figure that is well below the average of the countries around us, especially in As far as housing is concerned. The IMF warns that social assistance programs do not fully meet their objectives and observes gaps in adequacy and coverage, due to inefficiencies in administrative management, low income thresholds to access aid and lack of coordination. «These weaknesses hinder the reduction of risk levels of poverty, income inequality and social exclusion», says the IMF.

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