The EU must face up to recent projections showing that aging will have a major economic and budgetary impact
The population of the 25-member European Union (EU) in coming decades is set to become slightly smaller—but much older—posing significant risks to potential economic growth and putting substantial upward pressure on public spending. The region's old-age dependency ratio (the number of people 65 and over relative to those between 15 and 64) is projected to double to 54 percent by 2050, meaning that the EU will move from having four persons of working age for every elderly citizen to only two. In addition, upward pressure on spending has fueled concerns that unsustainable public finances could jeopardize the smooth functioning of the single currency, the euro.
Population aging in Europe is occurring because of the interaction of four demographic developments. First, fertility rates in all EU countries are, and are projected to remain, below the natural population replacement rate. Second, the recent decline in fertility rates followed the postwar baby boom, and the impending retirement of these cohorts will lead to a transitory increase (albeit lasting several decades) in the old-age dependency ratio.
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