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article imageSpain: Social Security holdings 97% Spanish debt

By Larry Clifton     Apr 5, 2013 in Politics
Madrid - As Spain’s economy goes, so goes the Reserve Fund of Social Security. The financial instrument relied on by Spain’s retirees increased its holdings in Spanish debt to a whopping 97 percent in 2012, up from 90 percent in 2011.
As recently as 2007 the reserve funding for Spanish Social Securities was balanced 50/50 between Spanish and foreign debts.
More than 70% of purchases occurred in the second half of 2012, coinciding with ECB President Mario Draghi’s “whatever it takes” economic strategy to defend the euro. Easing of constraints by Spain’s government helped push Spanish debt leading to the nation’s government and banking system to the brink of economic collapse.
Having a retirement system so vastly leveraged is particularly troubling because in September of last year, for the first time ever, the government was forced to dip into the reserve fund to pay pensioners.
The government withdrew 3,063 million euros from the reserve fund to pay for November 2012 pension increases. Meanwhile, economists say the fund is far too heavily weighted to Spanish government bonds.
Some analysts say the Reserve Fund of Social Security could plunge below the surface in a sea of red ink from the weight of its own lopsided economic ballast, leaving millions of pensioners without a financial lifeboat.
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