Spain Needs ‘Urgent’ Pension Overhaul, Tax Changes, OECD Says

Spain needs an “urgent” overhaul of its pension system and may have to raise taxes to tame the euro-region’s third-biggest deficit and avoid a jump in corporate borrowing costs, the Organization for Economic Cooperation and Development said.

The Spanish government is making “progress towards sustainability” of its public finances, although some measures need to be “spelled out,” the Paris-based group said in a report today. The tax burden is lower than in other European nations, leaving room for increases, which may “have a relatively more benign impact on activity than some expenditure cuts,” it said.

Facing a surge in borrowing costs, Spain is trying to convince investors it can cut its budget deficit while shepherding the economy back to growth after an almost two-year recession. Support for the Socialist government is slumping as it implements the deepest austerity measures in three decades and plans to pass a pension overhaul to on Jan. 28 that will then be presented to Parliament.

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