LONDON, Oct 8 (Reuters) – Graying Europe has long been considered an outlier in global demographics – but the rising cost to its governments in terms of bills for pensions and healthcare are more manageable than assumed and less than in rival economies in America and China.
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Familiar problems and necessary remedies recur – pressure on budgets due to longer life spans, the need to raise retirement ages gradually and for better-funded pension and care systems, and more targeted employment-based inward migration. Indeed one eye-catching line from the report is that it now looks likely the baby-boomer generation will have experienced longer retirement than either their parents or their children.
But perhaps the most remarkable takeaway was how relatively contained Europe’s fiscal burden appears in aggregate.
That’s not to put a gloss on a worrisome problem – one raising the prospect of falling workforces, weighing on the continent’s potential growth and with little hope of a reversal of alarming birth rate declines.
But the context of where Europe fits into the global picture – at least in terms of its fiscal exposure – is certainly very different from prevailing gloomy narratives.
Breugel’s report calculates that on average the European Union’s 27 members ageing-related costs will rise by just over 1% of GDP over the next 45 years – with categories including pensions, long-term care, healthcare and education.
Curiously but intuitively, the projected baby bust means falling education costs register as a saving for the whole bloc.
The circa 1 percentage point of GDP rise in costs the report outlines – about 210 billion euros relative to this year’s GDP – was then compared to equivalent estimates for the United States and China.
Europe’s ageing burden far less than US or China
