Ageing and the European pension schemes

Abstract

Europe must face unprecedented demographic changes in terms of size and significance. Its natural population growth has dropped to historic lows: it practically equals zero, and in several countries immigration has become the most important, if not the only source of population growth. Productivity has dropped below the level needed to replace the population – 2.1 children per woman – in every country. In fact, this ratio is lower than 1.5 children in many member states. Strangely enough, this indicator is the smallest in the southern member states (Italy, Greece and Spain) that are said to be more family centred. By the middle of the century the population of Europe will have drastically declined. Population drop means ageing, and ageing means the reduction of the growth potential of the EU! Due to the growth in the ratio of pension-age citizens, the GDP growth capacity of the EU may shrink form the current 2–2.25 per cent to 1.25 per cent by 2040. Europe has a tough task ahead: it must increase its natural population growth, it must find the social balance and justice between the different generations, and it must find resources commensurate to the rapidly growing pension and healthcare costs.