Spain has been quietly tapping the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds, raising questions about the fund's role as guarantor of future pension payouts.
At least 90 per cent of the €65 billion fund has been invested in increasingly risky Spanish debt, according to official figures, and the government has begun withdrawing cash for emergency payments. Although the trend has drawn little public attention or controversy, it has become a matter of concern for the relatively few independent financial analysts who study the fund, which is used to guarantee future payments of pensions. They say the government will soon have one less recourse to finance itself as it faces another year of recession and painful austerity measures to close a big budget deficit. That pressure could force Prime Minister Mariano Rajoy's government to seek a rescue this year from the European Union's bailout fund, a politically risky course he seeks to avoid.
Analysts say Spain will have trouble finding buyers for the estimated €207 billion in debt it plans to issue in 2013, up from €186 billion in 2012, to cover central-government operations, debt maturities of 17 regional administrations, and overdue energy bills.
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