Demographic change will hit public debt sustainability in European Union countries

Abstract

By consecutively applying the EU’s debt sustainability analysis through 2052, we find that EU countries must improve their primary balances during the initial four-to-seven-year adjustment period starting in 2025 and then maintain these balances at broadly stable levels. However, in most countries, fiscal adjustments in the non-ageing portion of the budget must continue and reach historically high levels. Risk factors may necessitate even greater adjustments, while policies could partially alleviate fiscal pressures. The implementation of EU country-specific recommendations related to labour markets, pension systems, and productivity has been limited, and these recommendations do not adequately address immigration and fertility-enhancing policies.