EU's ticking demographic timebomb to focus minds at Budapest talks

EU's ticking demographic timebomb to focus minds at Budapest talks

By Jan Strupczewski

An inexorable decline in the number of working age Europeans will put a huge strain on welfare systems and public finances in coming decades, according to a report that will form the basis of EU discussions later this week on the demographic timebomb.

The presentation, prepared for senior finance ministry and central bank officials from the EU's 27 member states by the Bruegel think tank, said Europe's ageing society will cut the number of people with jobs and paying taxes while boosting the number of those drawing pensions and needing more health care.

Even allowing immigration to continue at current rates - already an unacceptable solution for many Europeans, as shown in growing support for far-right parties - will not be enough to offset the decline in the working age population, it said.

Hungary, which holds the EU's rotating presidency and will host the discussions on Friday and Saturday, is strongly opposed to increasing immigration and is expected instead to propose remedies such as raising fertility rates through more support for families and boosting labour force participation.

Bruegel said that in the absence of net immigration, the number of people in the 20-64 working age bracket in Europe will fall by about a fifth to 207 million in 2050 from 264 million in 2022.

Even if the 450-million-strong European Union accepted slightly more than one million immigrants a year -- broadly the average from 2016-2020 -- this would make up for less than half of the decline in the working-age population, Bruegel said.

Other possible actions to help alleviate the impact of an ageing population include better management of healthcare and long-term care costs as well as reform of the pension and health systems, according to the documents under discussion.

According to the European Commission's 2024 Ageing Report, for every 10 inactive people above 65, there will be only 14 employed people in 2070, down from 22 in 2022.

The Budapest gathering comes as the EU's 27 member states finalise negotiations with the European Commission on individual four- or seven-year debt reduction paths that would put their public debt on a sustainably downward trajectory.