ECOFIN COUNCIL: MINISTERS TO DISCUSS CHALLENGES POSED BY AGEING POPULATION.

The document, the broad outlines of which were approved by the Commission on February 8, analyses the impact of an ageing population and its consequences for spending on pensions, health, education and employment in the 25 the EU member states over the period 2004-2050.

Declining population of working age.

The ageing trend is due to falling birth rates and longer life expectancy. The problem is that whilst the population of working age (15-64 years) is expected to fall by some 48 million inhabitants by 2050, the number of people over 65 is projected to increase by 58 million (+77%). Even if the EU employment rate were to rise from 63% in 2003 to 70% in 2020, in line with Lisbon Strategy objectives, the overall population of working age would nevertheless continue to decline dangerously. There is likely to be a shortfall of some 10 million people on the labour market by 2050.

Impact on growth.

Average growth in the EU15 member states is likely to follow the same downward trend (whereas experts are forecasting growth of about 2.2% over the period 2004-2010, this rate is likely to fall to 1.8% between 2011 and 2030 and to 1.3% between 2031 and 2050). The same causes will produce the same effect in the 10 new member states. That said, the report warns that the situation might be even more dramatic in view of the likely fall in employability and labour productivity (two key elements for economic growth). Whereas employability should have a slightly positive impact on growth up to 2010, it will have no impact on growth between 2011 in 2030, and may even become a negative factor in subsequent years up to 2050.

Lisbon agenda maintained.

In spite of this catastrophic long-term scenario, the Lisbon strategy objectives are naturally maintained by experts, notably regarding increases in employment rates and labour productivity. The euro-zone is a particular concern since employment rates are not expected to reach 70% before 2035 (2020 for the rest of the EU). One consequence is that further structural reforms will need to be introduced in the short term.

Significant rise in pensions burden.

The report looks at several case scenarios. In five member states projections forecast a cut in the pensions burden, whilst in nine countries, the increase is not expected to exceed 5% over the period. Six countries are by contrast a major concern for experts. The sustainability of public finances in these countries is clearly called into question: this is the case...