Spain to overhaul pension system

Changes part of plan to cut third-largest deficit in Europe

The Spanish government wants overhaul the country's pension system by raising the retirement age and increasing the way pension payments are calculated.

Prime Minister Jose Luis Rodriguez Zapatero has proposed raising the retirement age to 67 from 65 and increasing the number of years of contributions that are used to calculate pensions as a way to help put the country's finances in order.

The changes, which must go through a cross-party parliamentary commission, could result in lower average pension payouts.

Changes to the country's pension system are part of the Socialist government's plan to cut the country's deficit, the third-largest in Europe, by one-half in two years.

Other European countries are also looking at pension reforms, with the French government raising the retirement age to 62 from 60 and the Greek government pushing back retirement ages and cutting pension payments.

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