Fast Forward Foundation, complementary pension focus for students
3' min read
3' min read
The Competitiveness Report presented by Mario Draghi to the European Commission is a shock that continues to reverberate from one corner of the continent to the other. It warns us that a long and favourable period of stability has come to an end. That the economic, technological and geopolitical foundations on which we have built our world are failing. And that this is 'an existential challenge'.
Welfare is a key to this challenge. Not only because "the European Union is entering the first period in its recent history in which growth will not be sustained by an increase in population", but because we risk not being able to finance our social protection system precisely during a transition that may be painful for many European citizens.
A few figures may help to understand the extent of the problem. In the European Union, the demographic dependency ratio, which measures the number of people aged 65 and over relative to the active population (between 20 and 64), has risen from 16.7 per cent in 1960 to 35.1 per cent in 2020. This means that more than one third of the European population is already out of the labour market, with less than two active workers for every inactive citizen.
OECD sources remind us that, today, major European countries spend over 10% of their GDP on public pensions, with peaks of 16% in Italy and 13.9% in France. These systems, which rely mainly on active workers funding pensions, face serious risks to the sustainability and adequacy of future pension benefits.
Furthermore, according to European Commission data, expenditure on health and dependency is expected to increase by about 1 per cent of GDP by 2070. In particular, non-self-sufficiency expenditure will double from 1.7 per cent in 2019 to 2.8 per cent in 2070.
