Experts Warn of Spain's Unsustainable Economy Amid Pension Crisis

Prominent economists are sounding the alarm on Spain's economic sustainability, focusing particularly on the pension system's dire challenges. Santiago Calvo, an economics doctor, labels Spain's pension system a "elephant in the room," explaining it consumes a third of public expenditure and runs on a pay-as-you-go model where current workers finance today's retirees. The worker-to-pensioner ratio has shrunk dramatically from 7:1 in the 1970s to 3:1 currently, expected to drop further to 2:1 within 20 years, meaning each worker will support half a pensioner. Calvo highlights that Spain maintains a high pension replacement rate of about 80%, allocating nearly 50% of GDP per capita to pensions. Due to retiring baby boomers, pension spending could increase from 13% to 17% of GDP over the next two decades, exacerbating fiscal strain.

Additionally, Calvo points out disturbing generational wealth disparities: senior citizens’ wealth has doubled in 20 years while the youth's has declined amid precarious employment and high unemployment, undermining their ability to save and settle. He advocates pension reforms such as indexing pensions to wage growth rather than inflation and boosting system transparency.

Supporting these concerns, Lorenzo Bernaldo de Quirós, president of Freemarket Corporative Intelligence, critiques Spain’s economy as an "enormous mirage" built on unsustainable growth reliant on public spending, immigration, and tourism. He stresses poor productivity and labor market rigidities have kept unemployment high despite GDP growth. Bernaldo faults successive tax hikes for failing to cut structural deficits (~3%) and calls current pension arrangements unsustainable, urging a shift towards a capitalized model. He also warns that immigration, while potentially positive, must be carefully managed to avoid dependency on social aid.

Both experts call for structural reforms to address demographic pressures, economic inefficiencies, and pension system deficits to prevent a future social and economic crisis for Spain.