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EU: Demographic Time-Bomb Ticking In Europe

The EU says a time bomb is ticking in Europe. It's called "old age." Europeans are growing older and the number of new births is falling. One possible consequence is that soon Europe may have to encourage immigration. Correspondent Roland Eggleston reports a more immediate question will be how to finance retirement pensions.

Munich, 5 May 2000 (RFE/RL) -- The message is not new. European experts have been warning for years that the population is growing older and governments will have to face up to the consequences.

But in a recent speech, the president of the European Union's Executive Commission, Romano Prodi, dramatized the warnings with some hard figures.

He says in just 25 years -- by 2025 -- more than 110 million west Europeans will be retired and getting a pension. That is almost a third of the present European population.

Most of those pensions will be government-financed. That is, they will be financed by the taxpayer. Relatively few people in western Europe have a non-government pension scheme.

The problem is that by 2025 there may be fewer taxpayers to finance those pensions. German labor official Sonja Baum sums it up this way:

"The fact is, fewer children are being born in western Europe today [than in previous times]. And fewer children now means fewer people in the work force in 20 years to pay for pension plans."

Studies carried out by the United Nations indicate that throughout Europe women are having fewer children. In Germany, the national statistics office recently confirmed the UN's findings. In a report last month, the office said that in April 1999 there were only 4.5 million children under the age of six. That is 13 per cent less than in 1991. The German figures are based on a national micro-census conducted every few years.

In Sweden, the birthrate is at an all-time low of only 1.5 children per woman. In Italy, women now bear an average of 1.2 children. The last time Italian women bore more than two children on average was as long ago as 1945.

According to the UN, Italy's declining birthrate could mean its population will fall by 28 per cent by the year 2050. Instead of the present 57 million it will have only 41 million. The UN study shows a similar picture in several other west European countries.

Not only is the birthrate falling, but Europeans are living longer. One example of the challenges created by an aging society is Sweden. There, women can expect to live to around 82 and men to 77.

Most experts believe the consequences will begin to become apparent in Europe around the year 2010. That is when the so-called "baby boomers," who were born in 1945 or immediately after reach the age of 65.

EU analysts believe that member-states will have few problems financing the "baby boomer" pensions in 2010. But in the following years, falling populations may mean there are fewer workers to provide the financial basis for the funds.

A German analyst, Jens Berk, says that he expects the situation to become really serious by the year 2030. That is when those born in 1965 will begin to retire and expect their pensions.

The possible shortage of workers is already causing concern in Germany. The president of the National Labor Office, Bernhard Jagoda, said in a recent interview that the falling birthrate could lead to a shortage of German workers as early as the year 2010. He suggests Germany might have to introduce an immigration program to provide a workforce.

Jagoda chose his words carefully because many Germans are hostile to the idea of a new wave of immigrant workers, like the Turks who were imported in the 1960s. German politicians are beginning to discuss a possible immigration law, but only cautiously.

Immigration as a solution to labor problems is also being considered in northern Europe. Last month (April) the chairman of the Confederation of Danish Industries, Hans Skov, complained that most people in his country retired at the age of 61. He added: "We may have to make room for immigrants in the labor market."

Most European governments are beginning to face up to the problem -- but only slowly. In France, Italy and Germany, governments have delayed taking hard decisions, although Italy did introduce some reforms in 1995 and 1997.

In France, the Socialist government led by Lionel Jospin has cautiously discussed the possibility of eliminating special retirement programs for certain occupations. For decades, some French workers -- such as train drivers or miners -- were allowed to retire at 50 or 55. But any measures curtailing these privileges will be unpopular.

In the Netherlands, the government and employers are experimenting with a program called "65-Plus" to encourage retirees to take-up part time jobs as a partial solution to the crisis. The argument is that many people compelled to retire at 65 soon become bored and are interested in part-time work for pay. Employers pay them 20 to 25 per cent less than regular workers because they no longer have to contribute to social security and other benefits.

But there is a deeper purpose to the initiative. A recent government study suggested that by 2030 the Netherlands should try to double the number of working people over 55. The study said this was necessary to pay the bills for pensions and for disability and unemployment benefits.

The problem is pan-European,. That's why the EU in Brussels says it is expects that eventually it will have set up a special group to try to work out solutions that can be applied in several member-states.