Abstract

There are two main approaches to the analysis of the present financial crisis of the social security system. To some, the crisis has structural roots, as the gap between benefit payments and payroll contributions tend to rise in the absence of a profound reform in the system. To others, the explanation is still one of a conjunctural nature as the recessive policies have opposite effects on the two sides of the social security budget: lower revenues cannot match an increasing expenditure in a situation where the benefits are fully indexed. The paper reviews the main arguments of these two versions as well as additional explanations that refer to a premature liberalization of the benefits and the lack of a sound financial policy in the past, which did not allow the accumulation of reserves to face periods of distress. The main propositions following the distinct interpretations of the crisis are, then, analyzed, the emphasis being on the redistributive effects of cutting benefits and/or changing the financial basis. The paper ends by arguing that before going into the discussion of specific measures to solve the crisis, it will be necessary to appraise the degree of protection offered to distinct social groups through the social security system.