Later retirement, as proposed by the Maltese government last March, could prove essential for the eurozone to avert a plunge in economic growth due to ageing revealed a research paper published by European Central Bank (ECB) in the recent days. One of the main changes put forward in the government’s final proposals on pension reforms is the increase in the statutory retirement age from 61 to 65 years of age. This change will be carried out in an incremental manner.
Among the key suggestions put forward by the ECB study to prevent the negative economic implications are increasing the labour supply by raising the effective retirement age as well as the average hours worked.
The paper also claims that boosting female participation to close the apparent gender gap in the working force aged between 25 and 54 could also prove helpful.
According to EUObserver under current trends, the euro area will experience shrinkage in its population in absolute terms after 2020, leading to every third person expected being above the age of 64 by 2050.
In turn, United Nations estimates forecast that in Germany, Greece and Italy the total population is likely to already decline within the next 5 to 10 years. Belgium, France, the Netherlands, Austria, Portugal and Finland will experience this phenomenon by 2026. However, the eurozone as a whole could see its economic growth fall to around only 1% of GDP per year between 2020 and 2050, the ECB report says.
The paper further notes that economic migration could be less effective as another way for European Union (EU) member states to tackle their ageing population problems. Viewed only as a complementary to other policies, the study says that “the stabilisation of old age dependency ratios through migration alone is unlikely".
The Maltese government's final proposals for the pensions reform were published in March and will come into effect as of the 1st January 2007. Recently a Standard and Poor’s (S&P) report revealed that if Malta does not undergo fiscal reforms, age-related public expenditures will rise to 17.4% of GDP in 2050, up from 13.9% in 2005. In outlining its proposals for the reform, Opposition and the Malta Labour Party leader Dr. Alfred Sant insisted that “The pension reform is a lengthy process which should not be rushed”.
See also:
Pension reform should not be rushed - MLP
By Alexia Conti
Jul 8, 2006, 18:10 CET
Pension reform to come into effect in January
By MaltaMedia News
Jun 25, 2006, 09:28 CET
Government's final proposals on pensions reform published
By Roseanne Sammut
Mar 1, 2006, 16:29 CET
