TL;DR: Europe’s pension systems were designed when workers died at 67. Now they retire at 60 and live to 85. The pyramid has inverted. Spain is the canary – Germany, Italy, and France are next. The young can’t afford kids, can’t afford homes, and can’t afford to stay. This isn’t a policy failure, but a choice. The intergenerational contract has been rewritten. And the people making the edits aren’t the ones paying for them.
Last Xmas I Gave You My Unsolicited Rant
Last Xmas I Gave You My Unsolicited Rant: I spent Christmas in Spain. Think hors d’oeuvres, jamón platters, turrón/cava and we all know him, we all love him: drunk uncle (let’s call him tío pepe). It didn’t take long for him to launch into his annual sermon about “la juventud de hoy.”
Kids these days. Don’t want to work. Too comfortable.
Tío pepe is 63. He retired at 59 on a full pension. He bought his apartment in 1987 for €25,000. It’s worth €380,000 now. He’s never refreshed a job portal, never been ghosted by a recruiter, never been told his application was rejected because they found someone with ten years of experience willing to work for entry-level pay.
I smiled, poured more wine, and let it go.
Arguing with a man who bought his economic security for the price of a used car isn’t a debate. It’s archaeology.
Speaking of fun, this reminded me of a chart: Spanish public spending by age. In essence, a tidal wave flowing toward pensions while education and youth services flatlined.
Someone (@yocontratodo) put it next to Goya’s Saturn Devouring His Son.
They’re the same picture.
The Demographic Ponzi
I’ve written before about how markets are Ponzi schemes – confidence games that work as long as new money flows in. The European pension system runs on the same logic, except the “investors” aren’t recruited. They’re born.
For decades, this worked. Wide base of workers, narrow apex of retirees. Many paying in, few drawing out.
That pyramid looks more and more like a mushroom every year. Demographers have a polite word for this shape. I call it the coffin chart – wide at the top, narrow at the bottom, and someone's getting buried.
Exhibit A:
Spain, for instance, is heading toward a 1:1 ratio – one worker funding one retiree. The birth rate has collapsed to 1.16 children per woman, lowest in the EU. The workers aren’t being born. But the retirees keep retiring (which is why they’re fueling GDP with immigration, but that’s a separate story).
In 2025, Spanish pensions rose 2.8%, indexed to inflation. Starting salaries for young employees? Flat.
We’re protecting the past from inflation while letting the future rot. I call this the elephant chart. Once you see it, you can’t unsee it:
Spanish public spending by age. The blue tsunami on the right? Pensions:
Madafaking Bismarck
Spain isn’t special. It’s just further along the curve.
Germany’s pension system –the Umlagerentensystem– was designed by Bismarck in 1889. It assumed workers would die shortly after retirement, not live another 25 years. It assumed population growth, not collapse. It assumed the future would always have more workers than the past had retirees.
Every assumption was wrong.
Germany’s ratio is heading toward 1.5 workers per retiree. Italy is worse. France is rioting about raising the retirement age from 62 to 64 – two years, and they set Paris on fire (good on them, I guess).
The pay-as-you-go system is designed for a demographic reality that no longer exists.
The Silver Vote
Why doesn’t anyone fix this?
Because 10 million pensioners vote in Spain alone. They vote in every election, like their lives depend on it – because economically, their lives do depend on it.
The young? Busy. Disillusioned. Abroad.
A politician who proposes pension reform loses the next election. So no one proposes it. The budget is a straw in the young's milkshake. The old are drinking. Everyone knows the young will never see the same return. No one says it out loud.
The dead hand of the past has a vote in Spain – and it’s not letting go.
The Drawbridge
Extraction turns predatory at the housing level.
Nearly 90% of Spaniards over 65 own their homes outright. Most bought when housing was a fraction of its current cost relative to wages.
Today, the average Spanish renter spends 47% of gross income on housing – up from 38% in 2019. In Madrid, it’s 71%. Not a mortgage – rent. The money flows directly from productive worker to asset-holding pensioner.
Your grandmother’s apartment cost three years of salary in 1978. Today it would cost twenty – if you could get a mortgage. Which you can’t, because you don’t have a permanent contract. Because companies don’t give permanent contracts to people under 35.
The property ladder isn’t a ladder anymore. It’s a drawbridge. And the people who crossed pulled it up behind them.
The social contract used to mean: you work, you save, you build equity, you retire on what you built.
The intergenerational contract meant each generation left the next one better off.
Both contracts have been voided. The young just weren’t consulted on the terms.
Economist (@JesusFerna7026) ran the numbers: the average Spaniard’s lifetime net fiscal position is negative €21,000. You pay in more than you’ll ever get back. A wealth transfer with no return address.
The cruelest part? They still give the advice. “Just save more. Just work harder. Just be patient.” As if the game hasn’t changed. As if they didn’t change it.
The Three Exits
When a system extracts without offering a path forward, you exit.
Biological: Spain’s fertility rate is 1.16. You can’t afford kids when you’re funding someone else’s retirement. So you don’t have them. The pyramid shrinks further.
Geographical: I know many Spaniards with degrees on top of degrees in Berlin. All left for the same reason: in Germany, they’re workers. In Spain, they’re ATMs. But Germans are leaving too – for Switzerland, for the US, for anywhere the tax wedge doesn’t eat half their salary before they see it. The brain drain isn’t Spanish. It’s European.
Economic: Spain’s shadow economy is 20-25% of GDP. When the system treats you as a resource to extract, you go underground. Cash. Crypto. Anything that doesn’t pass through the tax authorities on its way to the pension fund.
The system won’t save you. The question is which exit you’re taking.
The Quiet Part Out Loud
Here’s what no one says publicly:
The system isn’t broken. It’s working exactly as designed – for the people who designed it.
Pensions get protected because pensioners vote. Housing stays expensive because homeowners vote. Labor markets stay rigid because insiders vote.
The young don’t vote enough. Don’t own property. Don’t have permanent contracts. Don’t have lobby groups. So the young get extracted from.
Democracy working as intended: the majority gets what the majority wants. They don’t call it the tyranny of the majority for nothing (democracy truly is the worst system, except for all the others).
The intergenerational contract?
The social contract?
Shredded.
Saturn ain’t devouring me, son.
En román paladino:
El primer vídeo profundiza en los datos económicos reales que sustentan la brecha entre las pensiones crecientes y los salarios estancados… y el otro va de monos.
insightful review with a somber perspective on the looming future. One issue at play is the young don't vote because they don't really have whom to: the alternative to conservative sameness can't be illiterate saviors chiming on proven failed doctrines (same dogs with SAME COLLARS, and then they wonder...).Maybe if the cowardness and hypocrisy would recede... yeah, sure.
I am not crying, you are crying (in the pillow)