Social security can't stay afloat without transfers: the deficit keeps growing

The debt accumulated by Social Security has reached unprecedented levels. In the past seven years, the system has gone from recording debt close to €34 billion to exceeding €126 billion. This figure, confirmed by the BdE, reflects growth of nearly four times compared to 2018, the year President Pedro Sánchez took office as President.

The problem lies in a persistent imbalance between revenue and expenses. Social contributions, which are the main source of funding for the system, aren't enough to cover all commitments. This shortfall forces the State to intervene with multi-billion euro transfers that guarantee the system's obligations are met.

Accounting magic

During the first quarter of 2025, Social Security's debt increased by 8.6% year-on-year, far above the growth recorded by other administrations. Most of this debt is due to loans granted by Central Administration. Although these operations aren't directly added to the total public debt, they do represent significant pressure on State resources.

This situation isn't new. Since 2017, when Mariano Rajoy faced difficulties paying the summer bonus, the system has been forced to seek external financing at key moments. Starting in 2018, coinciding with the massive arrival of the 'baby boom' generation to the pension system, tensions have intensified.

The State has planned transfers worth €43 billion during 2025, which brings the total amount of aid above €100 billion. This figure is equivalent to 8% of GDP and shows that Social Security isn't self-sustaining. In accounting terms, these transfers are presented as ordinary revenue, which allows the true size of the structural deficit to be concealed.

Studies such as those by Fedea have shown this distortion. In 2022, the system officially posted a deficit of €7 billion. However, without counting the transfers, the real gap would have exceeded €54 billion. This accounting disparity reveals just how much the system's viability depends on external resources.

A ticking time bomb passed from hand to hand

In the long term, the system faces an unavoidable demographic challenge. The aging population reduces the base of contributors while increasing the number of beneficiaries. According to estimates from BBVA and Ivie, nearly four million new contributors would be needed to balance the accounts, a figure that's unattainable even with full employment.

The Ministry of Social Security insists that the system is balanced and has reactivated the "pension piggy bank" through the Intergenerational Equity Mechanism. However, this strategy is more of an image operation than a real solution. Setting aside part of the income while turning to credit to pay expenses is equivalent to postponing the problem.

The social cost of this situation is also significant. The transfers come from general taxes, which are mostly contributed by the common-regime communities. Nevertheless, they're used to pay pensions throughout the territory, including the chartered regions, whose benefits are usually higher.

The structural tension of Social Security, in short, isn't limited to an accounting issue. It represents a risk factor for fiscal stability and forces a reconsideration of the system's overall sustainability. As long as the imbalance persists, the future viability of pensions will depend on increasingly complex, that is, painful, fiscal decisions.