Harbinger of things to come?

In June the following story was printed in an Australian online paper (link here)  If Spain goes ahead with this plan, how many other countries who are feeling the effects of recession and are faced with a growing older population will follow suit.

Spain could soon link state retirement payments to economic cycles and longer life expectancy under recommendations commissioned by the government and published on Friday.

But splits within the group of experts that produced the study on pensions signal a tough road ahead for the government as it pushes for unpopular changes to social security.

Brussels is demanding that Spain reform its pension system by the end of the year, along with other demands for reforms to remove imbalances from the country's economy.

Spain's centre-right government will use the recommendations as the basis for talks with opposition parties and unions over reforms aimed at preventing a long term pensions deficit.

Under one proposed formula, payments would be revised annually in connection with the system's costs and revenues, rather than to inflation as in the past, which could lead to lower pensions and buying power during times of economic crisis.

Another formula would link payments to life expectancy.

The ruling People's Party, or PP, recently passed a reform to restrict early retirement and is now pushing ahead with a wider revision of the system, considered unsustainable due to an aging population, low birth rate and high unemployment.

"We're trying to guarantee sustainability by introducing an alert mechanism, a component with a long-term vision," Victor Perez, head of the recommendations committee, told reporters.

The number of people contributing to state pensions has fallen to its lowest level in a decade after more than 3 million Spaniards lost their jobs and stopped paying into the system.

Spain has 9 million pensioners and the government spends the equivalent of 11 percent of annual GDP on pensions.

Only 17 million workers are currently paying into the system and in 2012 for the first time the government dipped in to the social security reserve fund to cover pension payments, as it struggled with both an economic recession and budget cuts.

A lack of consensus among the dozen, independent scholars who drew up the recommendations reflects the difficulty the PP may have in agreeing on the reform plans later this year.

The country's pensioners, who make up a key portion of the electorate, have been sustaining younger generations that are suffering under the 27 percent unemployment rate, so any cut to their payments could hurt millions of jobless families.