Ageing Europe’s pensions bill to ‘dwarf’ crisis debts
Brussels — A ticking timebomb of crisis-fuelled government debt will be "dwarfed" by the burden tens of millions more retired workers will have on European Union public finances in decades to come, Brussels warned last week.
The only solution, according to EU experts and a paper to be put to member states and the European Parliament, is for citizens to work well past their existing retirement ages — with only minimal healthcare and social security safety nets provided by the state.
Britain is the largest among 13 EU countries for whom the growing army of people above its current retirement age threatens to render unsustainable debt levels that are already at risk of spiralling amid financial market stimulus.
"Though the debt and deficit increases are by themselves quite impressive, the projected impact on public finances of ageing populations is anticipated to dwarf the effect of the crisis many times over," the commission paper reads.
From a deficit of 0.8 percent of GDP in 2007 — the best result for 30 years — government deficits across the 27-nation EU are forecast to average six percent of GDP in 2009 and around seven percent in 2010, the report says.
According to commission projections, by 2060, the EU as a whole will already have to shell out 4.75 percent of its gross domestic product each year just to deal with the pension problem. By then, one in three adults will be retired.
Warning of a "protracted impact" on growth efforts over the next decade, only Bulgaria, Denmark, Estonia, Finland and Sweden are deemed to have made the necessary budgetary and pension adjustments.
Germany, due to be overtaken by Britain as the EU’s most populous nation under the projections, will also be able to cope, it says, while France, Italy, Hungary, Poland and Portugal are already in such deep budgetary trouble that they could end up in a mess even beforehand.
However, Britain, the Czech Republic, Cyprus, Ireland, Greece, Latvia, Lithuania, Malta, the Netherlands, Romania, Slovenia, Slovakia and Spain are all in real danger, the report says.
Ministers will be told to reduce debt, increase employment and introduce "reforms" to social security.
"The main policy lever to ensure sustainability is through reform of pension and healthcare systems," the document states.
It says plans such as those advocated by Britain’s opposition conservatives to raise the retirement age — since backtracked on somewhat by leader David Cameron — "merit wider consideration."
The report argues that "the extension in working life and the respective accumulation of pension rights will have a favourable impact on pensioners’ income."
It also says healthcare reforms will look at "the balance of financing between patients, public and private insurers" and "ethical issues like access to expensive treatments."