Battling financial collapse, Spain plunders its Social Security funds

Back in November 2012, the Spanish government negotiated a deal with the European Central Bank that would see up to $100 billion invested into the troubled nation's failing banks. Such a move would help stem losses originating in Spain's depressed real estate market and protect Prime Minister Mariano Rajoy's government from having to devote more public resources to the country's financial system.

Yet with interest rates on Spanish government debt down to roughly 5 percent, a calmness had begun to set in among the nation's investors. Now, however, a news report stating that Spain had been relying on proceeds from its Social Security Fund to buy up otherwise unsellable debt could throw the question of the country's solvency back into the limelight.

According to various news outlets, including the Wall Street Journal, Spain has utilized nearly 90 percent of the Social Security account, which is valued at approximately $85 billion. Previously, the Spanish government had tapped this fund to cover other expenses, including a purported $3 billion withdrawal that federal officials have yet to fully explain.

European economists and investors are reportedly concerned about the revelation, as it shows that the Rajoy government has been reducing borrowing costs by utilizing proceeds from another government entity – effectively, Spain is monetizing its own debt.

"We are very worried about this," Dolores San Martín, president of a Spanish pensioners advocacy group, told the Journal in an interview. "We just don't know who's going to pay for the pensions of those who are younger now."

These fresh concerns highlight the continued volatility occurring in Europe's financial markets and major economists. Those with an investment stake in stock or equity exchanges may want to investigate other investing methodologies by visiting today and downloading a "Free Game Plan Report."