Spain's government reached a deal with labor unions to raise the retirement age from 65 to 67 on Thursday. Friday, the Spanish cabinet approved the plan, which still needs to be passed by parliament.
Spanish Prime Minister Jose Luis Rodriguez Zapatero has to reassure investors that Spain is committed to cutting costs and bringing down government debt. After the government's $27 billion plan to shore up its savings banks failed to calm markets, Zapatero had set a Friday deadline to reach a deal with unions or impose the change.
Spain joins Germany and France, which recently raised their retirement ages in response to the economic downturn and sovereign debt crisis that has plagued the euro zone. Economists have suggested that Spain might follow Greece and Ireland in needing a bailout, which the eurozone could ill afford given the relatively enormous size of Spain's economy.
The retirement age rise will be phased in starting in 2013. Currently, Spanish pensions are based on the final 15 years of a worker's career. Under the new system, they will be based on the final 25 years. That is daunting to young people looking for work in this country with more than 20 percent unemployment, the BBC reports.