EUROPE - European governments are facing rising costs due to population ageing, a new report has warned.
According to the latest annual eurozone assessment from ratings agency Moody’s, there is mounting fiscal pressure on countries due to the ageing population, with rising pension and healthcare spend.
And Europe is just beginning to adjust to its new demographics which will have “considerable consequences” for economic growth and the long-term sustainability of public finances. “Efforts to reduce age-related expenditure by reforming social security systems is important to secure long-term sustainability of public finances,“ said Alexander Kockerbeck, senior analyst at Moody’s and author of the report.
Most governments have only started to reform their state pay-as-you-go systems and to set up supplementary old-age provisions on a voluntary, funded basis.
The 1996 Stability and Growth Pact has helped to contain public debt as have average 2-3% GDP growth rates, moderate underlying inflation and low interest rates.
Kockerbeck added that Europe remains in a strong net creditor position of the eurozone vis-a-vis the rest of the world.
This is reflected in its Aaa foreign currency ceiling - the highest on Moody’s rating scale - which acts as marker for ratings of non-euro denominated issuers domiciled in member countries.
“Given the eurozone’s solid political and economic framework, only a substantial and far reaching crisis of the eurozone’s monetary and fiscal concept would seem able to put the Aaa status into question,” said Kockerbeck.
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