ECONOMY

Aging Greece faces highest fiscal risk in EU by 2050

BRUSSELS – Greece is facing the most serious problem in the European Union as a result of an aging population, which is actually projected to drop in the next decade, leading to a sharp drop in the economy’s growth rate and a skyrocketing of social spending, a report released by the Commission in Brussels yesterday shows. The report, on the viability of public finances in the member states, ranks them according to the fiscal risk they face from aging populations and Greece occupies the top spot as a «high-risk» country, being in «urgent need» of a fiscal rehabilitation. The problem is seen affecting all member states but Greece, Cyprus, the Czech Republic, Hungary, Portugal and Slovenia are in the high-risk category. According to the Commission’s estimates, the average public debt in the EU will rise sharply from 63 percent in 2005 to 200 percent in 2050. In the best-case scenario, the rise is projected to be only 80 percent, with two working people for every pensioner by 2050. The report – which was presented by Commissioner for Economic and Monetary Affairs Joaquin Almunia and Commissioner for Employment and Social Affairs Vladimir Spidla – projects that Greece, as a result of its aging population, will face a 12 percent rise in spending on pensions and healthcare by 2050 – a rate twice as high as that of most other member states. And its ratio of people at work to pensioners will be less than 2:1. The average growth rate of Greece’s gross domestic product is seen at 1.6 percent for the period 2011-2030 and just 0.8 percent in 2031-2050. But the most important conclusion of the report is that further reductions in the cost of social insurance systems are not sufficient to deal with this serious situation. Though necessary, the reforms in this field – from imposing a lid on increases in pensions to limiting early retirement and raising the retirement age – in order to yield results must be combined with a series of other measures of fiscal, economic and social nature. For this reason, the Commission stresses the «utmost» need for rehabilitating public finances in order to free resources, which the servicing of the debt absorbs today, and, particularly, to defuse the upward pressures on interest rates. But it notes the need for support to couples so that they may have «as many children as they desire,» for improving productivity and competitiveness and tapping the «positive impact of immigration on the labor market.» Almunia cautioned, however, that an estimated 40 million immigrants will also begin drawing pensions by 2050.