EUROPE - European governments will be forced to shell out an average E456bn a year if public expenditure and pension benefits continue to run at current levels.
The European Financial Services Round Table (EFR), which represents some of the world’s biggest banks and insurers including Deutsche Bank, AXA, ING, Allianz and Barclays, have urged leaders to speed up the creation of a single European financial market - ahead of EU enlargement in June 2004 - as a way to tackle the crisis.
Pehr Gyllenhammar, chairman of the EFR and UK insurer Aviva, said: “This is an urgent and major issue.
“Political leaders will have to take more decisive action soon, or face justified criticism for destroying the well being of generations of Europeans.”
Gyllenhammar highlighted figures from the Economic Policy Committee which showed that state pension costs, as percentages of Gross Domestic Product, are set to grow by 30% - from 10.4% in 2000 to 13.6% in 2004 - if policies remain unchanged.
The greatest need for savings was in France with E137bn needed per annum. Finland fared best with only E3.11bn needed annually.
The EFR proposed the creation of a single European financial market as one way of confronting the issue.
The Lisbon Strategy of 2000 demonstrated the political will for a single market in financial services, but turning this idea into reality is proving painfully slow,” said Gyllenhammar.
“Financial services remains the 'missing link' in a single European market. Europe's leaders need to commit to an urgent course of action... .”
The EFR highlighted the benefits of a single financial market including faster economic growth, of about 0.5%-0.7% annually in GDP; a reduction of some E10bn in the costs of savings; an increased choice of products and a greater take-up of private pensions.
Gyllenhammar said that raising retirement ages was only a partial solution, adding that a clear reduction in benefits was needed, with more education to encourage individuals to save.
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