1. The Core Ethical Problem in Spain

Spain has a triple intergenerational transfer:

A. Pensions:
Current workers pay current pensioners. No capital is saved for their own future. The oldest 1935 cohort clearly benefits in relation to the youngest 1965 cohort. This is basically due to the gap between current wages and the contribution bases established in the 60s and 70s.

B. Public Debt: Debt used to pay today's pensions will be repaid by tomorrow's workers.

C. Housing: 85% of Spaniards over 65 own a home, only 30% under 35 can. Bank of Spain data. Young pay rent to old, cannot accumulate wealth.

This violates John Rawls' Just Savings Principle: Each generation must leave enough that the next can maintain just institutions.

2. The Legal Architecture and Its Ethical Failures

The Pacto de Toledo (1995)

All-party agreement that pensions are a State issue, not partisan. Recommendations are a good starting point, but they are not enough to ensure sustainability. It is difficult to ensure intergenerational and intragenerational solidarity if the system does not work with sustainable mechanisms.

The Pacto says:

• Pensions must be contributory and proportional
• Reserve fund must exist
• But it also says pensions must maintain purchasing power (revalued with CPI)

Ethical contradiction: Maintaining CPI guarantees for old while young lose purchasing power violates intergenerational equity.

Reform 2011, 2013, 2021-2023, 2025

• 2011: Retirement age 65 -> 67, years to calculate pension 15 -> 25.
• 2013: Introduced Sustainability Factor and Intergenerational Equity Factor (IEF). The IEF was replaced by sustainability factor in 2013 with Law 23/2013. Idea: link initial pension to life expectancy.
• 2021-2023: Government removed Sustainability Factor (politically unpopular) and created Intergenerational Equity Mechanism (MEI).

The Intergenerational Equity Mechanism (MEI by its Spanish acronym), which raises the contribution rate by 0.6 percentage points in 2023 and gradually increases it to 1.2 points in 2029, where it will remain permanently.

Ethical critique:

• MEI taxes current young workers to pay for baby boomers retirement. It is not equity, it is a tax on the young. This recovery is partly due to the MEI, introduced in the 2023 reform, which adds extra contributions to prepare for the retirement of the baby boomer generation.
• Young workers earning €2,000 pay 0.15% extra, pensioner with €3,000 pension pays nothing extra.

Sustainability Crisis

• Spain faces a dual pension challenge. Rapid population ageing is putting increasing pressure on the long-term sustainability of the public pension system.
• The Independent Authority for Fiscal Responsibility (AIReF) maintains that the approved pension reform does not guarantee long-term financial viability. The new AIReF report updates forecasts for 2022-2050 and confirms that the deficit and public debt will increase due to the impact of an aging population.
• Pension spending forecast: rising from 12.9% of GDP in 2023 to 16%+ in 2050. Social Security Reserve Fund reached €15.267 billion in March 2026, its highest level in ten years, but this is only 5 months of payments. AIReF says even this is insufficient.

Result: Pensions in Spain: A Reform that Backfires - Academic models show reforms bring no significant variation to sustainability problems.

3. Ethical Theories Applied to Spain

1. Utilitarianism: Should we cut pensions slightly now to avoid 50% cut later? Spanish politicians say no, because pensioners vote (9 million voters). Young do not.

2. Rawls - Veil of Ignorance: If you did not know if you would be born in 1950 or 2000, would you design this system? No. You would want a funded component and automatic balancing.

3. Intergenerational Justice (Edith Brown Weiss): Each generation has duty of conservation of options, quality, and access. Spain fails on all three - leaving depleted reserve fund, high debt, and unaffordable housing.

4. Case Laws - How Courts Are Forcing Ethical Correction

Spain has no explicit constitutional right to intergenerational equity, but courts use equality and sustainability principles.

CASE 1: CJEU C-450/18 - WA v INSS (12 Dec 2019) - Gender + Intergenerational Equity

• Facts: Spanish law gave maternity pension supplement only to mothers of 2+ children receiving disability pension. Father with same situation denied.
• Ruling: CJEU declared that the pension supplement granted by Spain to mothers who are beneficiaries of a disability pension when they have two or more children must also be granted to fathers in a comparable situation.
• Ethical Principle: Intergenerational solidarity cannot be built on sex discrimination. If state rewards care work that creates future contributors (children), it must reward both parents. This is now basis for new complement de brecha de género (gender gap supplement).

CASE 2: CJEU C-411/05 - Félix Palacios de la Villa v Cortefiel (2007) - Forced Retirement and Generational Turnover

• Facts: Collective agreement forced retirement at 65 to allow youth employment.
• Ruling: Spanish legislation treats compulsory retirement clauses as lawful where those clauses provide as sole requirements that workers must have reached retirement age – set at 65 – and must fulfil other social security conditions.
• Ethical Principle: Intergenerational solidarity in employment is legitimate aim. Court accepted that pushing old out to let young in can be justified, if proportionate. This doctrine is now used to justify delaying retirement age to 67.

CASE 3: Spanish Constitutional Court - STC 128/2020, STC 61/2013, STC 3/2007 - Pension Cuts

• Facts: 2010-2013 Governments froze / cut pensions and cut public sector salaries to meet EU deficit targets. Pensioners challenged as violation of property rights Art 33 CE and Art 50 CE (right to adequate pensions).
• Ruling: Constitutional Court (SSTC 128/2020, 61/2013) said: Right to pension exists, but amount is not constitutionally guaranteed. Legislature can reduce pension revaluation for sustainability if measure is temporary, proportionate, justified by grave economic crisis.
• Ethical Principle: Intergenerational equity is constitutional limit. TC explicitly cited "sustainability of system for future generations" as justification for cutting current pensioners. First time TC used intergenerational language.

CASE 4: CJEU C-130/20 - INSS v. Mother with Early Retirement (2021)

National legislation providing for a pension maternity supplement to be granted to women who have had children – Exclusion of women who have requested early retirement. CJEU said exclusion is discriminatory.
Ethical link: Penalizing early retirement hits women who had career breaks for care, reducing their intergenerational contribution recognition.

CASE 5: ECHR - Manzanas Martín v Spain (2012) - Pastors Pensions

Pastor Francisco Manzanas Martín was denied pension because years of ministry prior to 1999 were not counted. European Court of Human Rights ruled against Spain for discrimination against evangelical pastors vs Catholic priests whose years were counted.
Ethical Principle: State must recognize all forms of social contribution to pension system, not just state-approved. Intergenerational contract must be inclusive.

CASE 6: Spanish Supreme Court - STS Social Chamber 2023 - MEI Challenge

Unions and employers challenged MEI as extra tax. Supreme Court dismissed, saying MEI is not a tax but a finalist contribution for intergenerational equity, justified by Art 40, 41, 50 CE. Case pending before Constitutional Court.

5. The Current Ethical Solution Proposed

Spanish economists (Fedea, AIReF, Bank of Spain) propose Swedish model:

1. Notional Accounts: Each worker sees what they contributed, pension = contributions / life expectancy. Transparent intergenerational transfer.
2. Automatic Balancing: If deficit > X%, pensions automatically adjust, not by political decision.
3. Funded Pillar: Auto-enrolment in occupational pensions. Today Spain relies predominantly on Pillar I, the public pay-as-you-go system, making it increasingly vulnerable.

Ethically, this moves from "promise-based" to "contract-based" intergenerational finance: you get what system can afford, not what politicians promised.

Bottom Line:
Spanish law currently protects current pensioners (Art 50 CE) more than future contributors. Courts are slowly inserting intergenerational equity as a limit via EU non-discrimination law and Constitutional sustainability doctrine. But without reform, Spain will face a choice around 2035-2040: raise contributions to 35%, cut pensions 20%, or massive debt transfer to grandchildren - all ethically problematic.