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EU faces strain of ageing population

The European Commission is warning governments they face lower growth rates and higher spending due to the number of elderly Europeans.

Last Modified: 13 Feb 2006 19:20 GMT
EU countries are urged to adopt new budgetary measures

The European Commission is warning governments they face lower growth rates and higher spending due to the number of elderly Europeans.

A commission report to the 25 EU governments said: "The retirement of the post-war baby-boom generation as of 2010 and continuous increase in life expectancy means Europe will go from having four to only two people of working age for every elderly citizen by 2050."

The commission said the scale of the challenge was immense and would trigger deep cuts in potential growth rates and strain public finances due to increased spending and healthcare by 2030.
 
The report by Joaquin Almunia, the EU monetary affairs commissioner, said that with spending and policy reforms, potential growth rates will be cut almost in half by 2030 and public finances will come under severe strain due to increased spending on pensions and healthcare.

Painful cost

Almunia said some EU states are meeting the challenge by curtailing access to early retirement and other pension reforms. The EU report said raising the retirement age and restraining future public spending are effective measures.

"Delaying inevitable reforms will only raise the budgetary costs"

Joaquin Almunia, 
EU monetary affairs commissioner

The report suggests that the next few years offer an opportunity to intensify reforms before the full effects take hold.
 
Almunia said: "Delaying inevitable reforms will only raise the budgetary costs... Delays will simply increase the cost and pain of adjustment, which is not fair for our children and grandchildren."
 
The report was to get a review later on Monday at a meeting of the finance ministers of the 12 EU nations that have the euro as a common currency.

It was compiled by the European Commission in collaboration with the Economic Policy Committee, a panel of economic and financial experts from the EU states.

Ageing population

Its main findings: The EU's population will be smaller but much older in 2050. It will drop to 454 million, from 457 million in 2010. The working-age population - ages 15 to 64 - is projected to fall by 48 million (down 16%) but the over-65 population will rise by 58 million (up 77%).

EU-wide, age-related public spending will see significant increases: by about four percentage points in 2005-2050, mostly due to increased pensions and healthcare costs.

Above-average increases in that period are foreseen for Portugal (up 9.7% of GDP), Luxembourg (up 7.4%), Spain (up 7%), Ireland (up 6.5%) and Belgium (up 5.1%).
 
Very large increases in pension spending by 2050 are projected for Hungary (up 6.7% of GDP), Slovenia (up 7.3%) and Cyprus (up 12.9%).

Recent reforms in Austria, Sweden and Italy have cut projected pension spending increases.

Source:
Agencies
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