Ministers assess impact of population ageing on public finances
By Sophie Petitjean | Wednesday 16 May 2012
The member states’ finance ministers have committed to boosting their efforts to limit as much as possible the economic and budgetary consequences of the ageing populations. They met in Brussels, on 15 May, and adopted a series of conclusions endorsing the 2012 report on ageing and outlining actions in light of the new projections. Once again, the ministers insisted on the importance of the further implementation of structural reforms “in order to durably enhance the growth potential of EU economies”..
PROJECTIONS FOR 2060
The report on active ageing, jointly penned by the Economic Policy Committee and the European Commission, covers the evolution of age-related public expenditure during the period 2010-2060 in terms of pensions, health care, long-term care, education and unemployment benefits. It is based on demographic data provided by Eurostat and on commonly agreed calculation methods. The report finds that in 2060 the EU will have 15 million more citizens. Moreover, the ratio of people of working age and those above 65 will decrease by half. Consequently, by 2060, age-related public expenditure (excluding unemployment benefits) should increase by 4.1 percentage points of GDP, and public pension spending should rise by 1.5 percentage points of GDP. Projections show that public expenditure for health care and long-term care should increase by 2.7 percentage points of GDP between 2010 and 2060. Further, when taking into account the possible evolution of non-demographic cost factors, public expenditure for health care and long-term care could reach 3.4 percentage points of GDP.
In light of this report, the Council of the EU stresses how urgent it is to respond to the economic and budgetary consequences of ageing populations. The Council calls for actions to quickly reduce government debt, to increase employment rates and productivity, and to reform pension, health care and long-term care systems.
The ministers particularly stressed that more should be done to raise the effective retirement age, “including by avoiding early exit from the labour market and by linking the statutory retirement age or pension benefits to life expectancy, [in line with the 2012 annual growth survey,] or [by including] other measures of equivalent budgetary effect”. The ministers called on member states to assess the performance of their health care systems and to envisage reforms in order “to achieve both a more efficient use of limited public resources and the provision of high quality health care”.
These projections should be used in the framework of the ‘European semester’ (coordination of national budgets).