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 tends to rise in the absence of a profound reform in the system.
To others, the explanation is still one of a conjectural 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, analysed, 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.

JEL Classification: H55; J32.