Wednesday October 14, 06:18 PM
Ageing Europe's pension bill to 'dwarf' crisis debts: EU
BRUSSELS (AFP) - A timebomb of crisis-fuelled government debt will be "dwarfed" by the burden that tens of millions more retired workers will have on European Union public finances in decades to come, Brussels warned on Wednesday.
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 where a growing army of the elderly threatens to make unsustainable debt levels that have increased sharply as governments have spent massively to get their economies back on track.
"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 said.
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.
According to commission projections, by 2060, the EU as a whole will have to spend 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 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 deep budgetary trouble even without the added problems.
Britain, the Czech Republic, Cyprus, Ireland, Greece, Latvia, Lithuania, Malta, the Netherlands, Romania, Slovenia, Slovakia and Spain are all in real danger, the paper said.
Ministers will be told to reduce debt, increase employment and introduce "reforms" to social security systems.
"The main policy lever to ensure sustainability is through reform of pension and healthcare systems," it said.
It said plans such as those advocated by Britain's opposition Conservatives to raise the retirement age "merit wider consideration."
Arguing 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 should look at "the balance of financing between patients, public and private insurers" and "ethical issues like access to expensive treatments."
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