2009 Ageing Communication: A Renewed Strategy for Tackling Europe’s Demographic Challenge
Europe's population is living increasingly longer and in better health, a huge achievement that we have every reason to be proud of.
However, ageing populations also pose major economic, budgetary and social challenges. While the first priority is to make the current recession as short as possible, we must not lose sight of the policies and reforms needed to ensure that the elderly have decent pensions and access to health and long-term care without putting an unsustainable burden on future generations. The 2009 Ageing Communication adopted today states that governments have a window of opportunity before the baby-boom generation retires, to implement policies that address the challenge whilst being compatible with the need to support the economy at this juncture, as recommended in the December European Economic Recovery Plan. Projections agreed with the Member States put the increase in age-related expenditure at an average of 4¾ percentage points (pp) of GDP in the EU by 2060. In the same period we will move from having four people of working age for every person aged over 65 to a ratio of 2 to 1. Ageing will already start affecting most EU economies in the coming decade.
Under the projected birth rates, life expectancy and migration flows, the population of the present EU will be roughly the same in 2060 at about 500 million, but will be significantly older. From 2015 deaths will outnumber births and the over 65 are set to increase to 30% of the population in 2060 from 17% in 2008. The biggest rise is expected during the period 2015-35 as the baby-boom cohorts retire. The 80+ would nearly treble to 12% of the total.
This means the EU would move from having four people of working age for every person aged over 65 to a ratio of only two to one. The shrinking workforce would also mean a lower potential growth while, on the basis of current policies, age-related public expenditure would increase on average by about 4¾ pp of GDP by 2060 in the EU (more than 5 pp in the euro area) through pension, healthcare and long-term care spending.
There has been progress to meet the challenge during the past decade and since the previous Ageing Report in 2006, notably through reforms of pension systems, but also by increasing employment levels amongst women, through the promotion of a better balance between professional and family life. While the employment rate of the 55+ age group has also increased, only around 50% are still at work by the age of 60 despite having another 24 years to live for women and 20 years for men, on average, in better health than ever before.
The current financial and economic crisis has led to a global recession that has set back significantly the progress with fiscal consolidation, which is part and parcel of a strategy to have long-term sustainable finances and to cope with ageing.
The priority must be the implementation of a targeted and well-coordinated policy response, as stressed in the European Economic Recovery Plan to ensure that the crisis will not put the EU permanently on a lower growth path in terms of employment and labour productivity. For this to happen, the response needs to be built on structural reforms. As soon as the economic recovery has been firmly established, it is crucial to reduce government deficits and to put public budgets on a sustainable path.
The three-pronged strategy to cope with the economic and budgetary challenge posed by ageing decided by the Stockholm European Council in 2001 remains a valid long-term policy strategy and consists of reducing debts rapidly as soon as the economy picks up; raising employment rates and productivity; and reforming pension, healthcare and long-term care systems. The same applies for the five policy goals identified in the Commission’s October 2006 communication on the demographic future of Europe, namely pro-family policies, promotion of new services and jobs to serve ageing populations and mobility of workers within the EU to avoid skills mismatches.
Coordination at European level helps by providing for the exchange of best practices, developing synergies and reducing negative spillovers. The Commission will continue to guide Member States in this regard notably by proposing in the course of this year a post-2010 reformulation of the Lisbon Strategy, an update of its report on the long-term sustainability of public finances.
