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THE NEW FRONTIERS FOUNDATION PRESS OFFICE
The New Frontiers team can be contacted for comment and interviews. We have done interviews on all the main TV and radio news programmes in the UK, and many abroad. We can also arrange interviews with a variety of businesspeople, academics, and political figures.
If you would like to arrange an interview, or if you would like us to add to you to our press list, please call us or email: media@new-frontiers.org
7 March 2005
NEW PUBLICATION -
NEW FRONTIERS FOUNDATION BRIEF - EUROPE'S DEMOGRAPHIC DECLINE
How demographic decline and its financial consequences will sink "the European Dream"...
New Frontiers has produced a new report on the scale of the demographic decline of the EU and the impact this will have on the economies of Europe. The report shows the following:
Fertility rates in Germany, France, and Italy are far below replacement levels while life expectancy grows. While America, India and China are projected to grow significantly, Europe’s population is estimated to decline by almost 10 percent.
By 2050, the working age population of the Eurozone will have fallen from 203 million to c. 160 million. If one assumes the same proportion as now of the working age population will actually be in work in 2050 (ie. 62 percent), this implies a fall in the workforce from 127 million to about 100 million: ie. the Eurozone is going to lose about 27 million workers while simultaneously gaining about 35-40 million pensioners.
Lawrence Kotlikoff, one of the world’s leading scholars of this issue, has recently published projections for the scale of unfunded pension commitments by 2050. For Britain, the figure is a mere 5 percent of GDP, while the equivalent figures are 70 percent for Italy, 105 percent for France, and 110 percent for Germany. The UK has private pension assets that exceed the combined totals of Germany, France, and Italy.
There are different ways of calculating the effects of these financial obligations assuming there is no major reform. The consequences of these enormous bills are estimated as: an 8 percent fall in real wages by 2030 and a 13 percent fall by 2050, and a rise in the total taxes on wages from about 40 percent now to about 50 percent by 2030 and 70 percent by 2050.
According to Standard & Poor’s (2004), the leading credit agency, Germany and France will see debt to GDP ratios increase to 200-300 percent if they do not reform and do not increase taxes to pay the bills.
The further consequences will be higher interest rates and even slower growth which will exacerbate the vicious feedback loop and drive the young out of the system or out of the Continent. Of course, long before these problems arise, the bond markets will start demanding higher interest rates and this shift may itself be a catalyst of crisis.
The arrival of millions of new workers from the ten new accession countries has obviously increased the population of the EU, but they will not solve Europe’s ageing problem as they are also facing the prospect of shrinking and ageing populations.
Overall, this vicious circle will contribute to the steady decline of Europe’s economic and political significance in the world. The relatively rapid growth of populations outside the EU means that the EU will become less important in the global economy. The European Commission’s own figures project that the EU’s share of total trade will halve by 2050 and its share of world GDP will almost halve as countries such as India and China expand.
To read the full report >CLICK HERE<
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