EUROPE - Without urgent reform, ageing populations will increase European Union public spending by 4% between 2005 and 2050, driven largely by the cost of pensions and health care.
Projections for future public spending in the EU25 member states were prepared by the Economic Policy Committee and the European Commission’s Economic and Financial Affairs Directorate General, to be discussed by EU finance ministers this week.
The groups reported that, between 2005 and 2050, spending on pensions in Portugal is likely to increase by 9.7% of GDP, 7.4% in Luxembourg, 7% in Spain, 6.5% in Ireland and 5.1% in Belgium.
Large increases in pension spending were also forecast for Hungary (6.7% of GDP), Slovenia (7.3%) and Cyprus (12.9%).
The EU said governments need to step up their reform efforts and that any delay would only raise the “painful and budgetary” costs.
According to the study, the retirement of the baby boom generation in 2010, and the continuous increase in life expectancy, would lead Europe to go from having four to only two people of working age for every elderly citizen by 2050.
With unchanged policies, EU potential growth rates would be almost halved by 2030, it warned.
European Economic and Monetary Affairs commissioner Joaquin Almunia said: “Member States should exploit a fast-closing window of opportunity to intensify reform efforts, especially in those cases where the long-term sustainability of public finances is most at risk.
“Unless this is done, many EU countries, from the old to the new members, will simply not be able to face the cost.”
But the report did concede that reforms enacted in several EU countries since the last age-related expenditure projection in 2001 appeared to have significantly cut the projected increase in public spending on pensions.
Several countries had curtailed access to early retirement schemes and reformed their pension systems, it said.
Such reforms would lead to an increase in average retirement ages and higher employment rates of older workers, the study found.
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