TELEGRAPH 30.4.09
Europe's age crisis begins to bite
The EU's working age population will peak next year before tipping
into decline for half a century
By Ambrose Evans-Pritchard
This will cause a relentless rise in pension and health costs that
risk asphyxiating the region's economy.
A new report by the European Commission said this financial crisis
could turn into a "permanent shock to growth" from which Europe never
fully recovers unless it moves fast to bring its public debts under
control.
The main danger is a "Lost Decade" akin to Japan's deflation slump,
with economies contracting by 0.9pc into the middle of the next
decade, but there is also a risk of a deeper downward spiral.
Every country in the EU has a fertility rate below 2.1 births per
woman, the minimum to keep the population stable. The average is
1.51, chiefly caused by women waiting late into their 20s or 30s
before having children. This stretches out the generations.
While the fertility rate is expected to rise over time, demographic
shifts tend to be glacial. An ageing crunch is already baked into the
pie, hitting hardest from 2015 to 2035.
Britain fares relatively well, helped by immigrants and - some say -
by its unwed teenage mothers, who lift the fertility rate at 1.8. The
British working age cohort will be the biggest of any EU country by
mid-century at 45m, followed closely by France.
If demographics is destiny, Britain and France may reclaim their
mid-19th century status as the two dominant powers of Europe, but by
then the Old World will be a much reduced force.
Germany's working population will shrink by 29pc to just 39m. Poland,
Bulgaria, Romania and the Baltic states will all see drops of over 40pc.
No country will be spared the vaulting costs of ageing, an extra tax
of 5pc on GDP, leaving aside the less visible tax on cultural
dynamism that comes with lost youth.
The EU "dependency ratio" will soar: there will be two workers to
support each person over 65, compared to four today. It will be worse
if Europe fails to attract enough immigrants, all too likely given
the catch-up under way in the developing world.
Faced with this future, Britain and Europe need to slash debt and
salt away investment wealth in the rising East. Instead, public debt
is exploding. Brussels has laid it bare: we will need hair-shirt
discipline once we emerge from this recession. It may be our last
chance.
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