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EU vows to cut debt to cover costs of elderly

EU vows to cut debt to cover costs of elderly

European Union governments vowed Tuesday to cut debt and reform expensive pension and health care systems that will put more strain on hard-pressed public finances as Europe's population gets older.
The EU's executive commission estimates that the EU will have to spend nearly 5 percent more of gross domestic product in pensions and health care costs by 2060. They currently spend 23 percent of GDP on age-related programs.
Deaths will outnumber births in the 27-nation bloc by 2015 and the number of people aged over 65 will almost double from 18 percent in 2008 to 30 percent of the EU's 500 million residents by 2060, the commission says.
EU finance ministers said in a statement following talks Tuesday that the current recession is hiking public debt and budget deficits and will make it "even more demanding" to cope with the rising cost of the elderly.
They said pushing on with labor market reforms to shore up public finances "is a crucial part of responding to the recession and underpinning a credible exit and fiscal consolidation strategy."
The financial crisis "may have a prolonged negative impact" on long-term growth, the ministers acknowledged, as governments spend heavily now to rescue troubled banks and boost growth with borrowings they will have to pay back, likely by raising taxes in the future.
EU nations said they were committed to economic reforms "aimed at increasing job creation and participation in the labor market, in particular to avoid early exit from the labor market and to raise the effective retirement age."
Some European countries allow certain categories of workers to take early retirement on full pension from the age of 55. Government efforts to raise this age limit often meet with fierce protests from trade unions.
An EU report published last month said Europe will have fewer workers and migrants over the next 50 years, which could reduce economic growth by 1 percent of GDP. At the same time, EU nations will spend 4.7 percent more of GDP to support retirees and pay for their health care.
Without any cutbacks, the total cost of EU state pensions will increase by 2.4 percent of GDP over the next 50 years _ although different nations will be affected differently depending on pension levels and the age of their populations. Health care will increase by 1.5 percent of GDP and state long-term care by 1.1 percent.


Updated : 2021-07-25 02:41 GMT+08:00