Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of theRegions - Dealing with the impact of an ageing population in the EU (2009 Ageing Report)
Date: 2009-04-21
Institutions: European Commission
Subjects: demography, economic consequence, labour market, occupational health, pension scheme, population ageing, report, vocational training

EN 

EN 

   EN 

 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 29.4.2009 
COM(2009) 180 final 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN 
ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE 
REGIONS  

Dealing with the impact of an ageing population in the EU  
(2009 Ageing Report) 

EN 

   EN 

 
 
 
COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN 
ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE 
REGIONS  

Dealing with the impact of an ageing population in the EU  
(2009 Ageing Report) 

1. 

INTRODUCTION 

For  the  first  time  in  history,  the  vast  majority  of  Europe's  citizens  are  able  to  lead  active, 
healthy and participative lives well into old age. At the same time, ageing societies bring new 
opportunities to innovative firms through the demand for new or adapted goods and services. 
However,  the  combination  of  ageing  and  low  birth  rates  also  poses  major  economic, 
budgetary  and  social  challenges.  Europe  has  started  to  prepare  for  these  challenges,  and 
encouraging  progress  has  been  made  by  some  Member  States,  notably  through  reforms  of 
pension systems and a better balance between professional and family life. However, without 
further  institutional  and  policy  changes,  demographic  trends  are  expected  to  transform  our 
societies  considerably,  impinging  on  intergenerational  solidarity  and  creating  new  demands 
on future generations. Such trends will have a significant impact on potential growth and lead 
to  strong  pressures  to  increase  public  spending,  not  only  in  terms  of  pension  and  health 
expenditure, but also in infrastructure, housing and education. 

Successive  European  Councils  have  recognised  the  need  to  tackle  the  impact  of  ageing 
populations  on  the  European  social  models.  The  policy  challenge  is  broad,  covering  the 
ongoing debate on modernisation of welfare systems and extending working lives as a follow-
up to the Hampton Court Summit of October 2005, the renewed Lisbon strategy, the renewed 
EU  Sustainable  Development  Strategy  and  the  "Integrated  climate  and  energy  policy",  the 
Open Method of Coordination on pensions, health care and long-term care and a strategy for 
youth1,  and  ensuring  progress  towards  sustainable  public  finances  in  the  context  of  the 
Stability and Growth Pact. 

It  is  within  this  framework  that  the  ECOFIN  Council  instructed  the  Economic  Policy 
Committee and invited the Commission to update the long-term budgetary projections by the 
end  of  2009.  The  joint  projections2  which  apply  new,  upgraded  methodologies,  broadly 
confirm  the  projections  of  2006.  They  provide  key  input  to  the  analysis  of  the  impact  of 
population  ageing  and  are  an  integral  part  of  the  EU's  multilateral  budgetary  surveillance. 
They  will  also  be  of  use  for  policy-makers  in  preparing  reforms  of  pension  and  health  care 
systems. 

This Communication presents the latest long-term economic and budgetary projections and a 
first take on the Commission's views on Europe’s ability to tackle the challenge of ageing in 
view of new data and the current economic developments.  

Recent analysis confirms that there is a window of opportunity – a period of about ten years 
during which labour forces will continue to increase – for implementing the structural reforms 

1 
2 

COM (2009) 200 final. 
See the '2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008-
2060)',  European  Economy,  forthcoming  and  'Demography  Report 2008:  Meeting Social  Needs  in an 
Ageing Society (SEC (2008) 2911). 

EN 

2 

   EN 

 
                                                 
needed  by  ageing  societies3.  Taking  no  action  would  weaken  the  EU's  ability  to  meet  the 
future needs of an ageing population. 

The  economic  crisis  could  make  the  challenges  created  by  ageing  more  acute.  The 
deployment of a targeted and well-coordinated policy response to the crisis, as outlined by the 
European  Economic  Recovery  Plan4  (EERP)  adopted  by  the  Commission  on  26  November 
2008,  must  therefore  be  seized  as  an  opportunity  for  concerted  efforts  to  overcome  the 
recession  by  supporting  economic  activity  in  the  short  run  and  through  reforms  geared  at 
strengthening investment in a more sustainable economy and society and putting age-related 
spending  on  a  sustainable  path5.  Investment  to  boost  training  and  human  capital  will  help 
address  the  impact  of  the  crisis  in  the  short  run  and  contribute  to  preparing  for  an  ageing 
society.  

2. 

THE LONG-TERM CHALLENGES OF DEMOGRAPHIC AGEING  

The economic impact of ageing 

Long-term projections are not forecasts, but are prepared on a 'no-policy change' basis, and as 
such provide important information of the effects of not taking action. The latest projections 
presented  in  the  2009  Ageing  Report  are  based  on  Eurostat's  new  demographic  projections 
released  in  April  2008.  Demographic  developments  differ  significantly  from  country  to 
country, but the overall population in the EU is now projected to remain the same in 2060 as 
today,  thanks  to  a  slight  rebound  in  the  fertility  rate  in  some  Member  States  and  more 
dynamic  immigration  flows,  while  in  2006  it  was  projected  to  decline  over  time.  However, 
the new demographic projections do not differ substantially in terms of population structure 
and they confirm that low birth rates, rising life expectancy and continuing inflow of migrants 
can  be  expected  to  result  in  an  almost  unchanged,  but  much  older,  total  EU  population  by 
20606, meaning that the EU would move from having four working-age people (aged 15-64) 
for every person aged over 65 to a ratio of only two to one. The largest decrease is expected to 
occur during the period 2015-35 when the baby-boom cohorts will be entering retirement. 

For  the  EU  as  a  whole,  the  labour  market  participation  rate  is  expected  to  increase  from 
70½% in 2007 to 74% in 2060, most of which will materialise before 2020. The gap between 
male  and  female  participation  rates  is  expected  to  narrow  gradually,  especially  in  countries 
where it is currently large. Overall, employment rates are expected to increase from 65½% in 
2007 to about 70% in 2060. The employment rate of older workers is expected to grow as a 
result of reforms aimed at prolonging working life in many Member States. Overall, however, 
employment  in  the  EU  is  projected  to  shrink  by  about  19  million  people  by  the  year  2060. 
Increasing labour force participation rates in most countries and rising net immigration levels 
in  some  will  only  moderate  the  fall  in  employment  due  to  the  shrinking  working  age 
population over the period from 2020 to 2060. 

With  decreasing  labour  supply,  productivity  will  have  to  be  the  source  of  future  economic 
growth.  A  prudent  assumption  is  that  Member  States'  labour  productivity  growth  would 
converge to a long-term historical average in the EU of 1¾%, close to that recorded in the US 
over  the  very  long  term.  As  a  result,  the  annual  potential  GDP  growth  rate  would  decline 

3 
4 
5 
6 

COM (2006) 571 final. 
COM (2008) 800 final. 
See the '2006 Sustainability Report', European Economy, No 4, 2006.  
See the '2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008-
2060)',  European  Economy,  forthcoming  and  'Demography  Report 2008:  Meeting Social  Needs  in an 
Ageing Society (SEC (2008) 2911). 

EN 

3 

   EN 

                                                 
significantly.  A  shrinking  working-age  population  will  act  as  a  drag  on  growth  and  on  per 
capita  income.  Owing  to  the  differences  in  demographic  trends,  growth  rates  would  differ 
substantially from country to country. 

The budgetary impact of ageing 

As a consequence of ageing populations, the need for public provision of age-related transfers 
and services will increase. The fiscal impact of ageing is therefore projected to be substantial 
in almost all Member States, becoming apparent already over the course of the next decade. 
Overall,  on  the  basis  of  current  policies,  age-related  public  expenditure  is  projected  to 
increase on average by about 4¾ percentage points of GDP by 2060 in the EU and by more 
than 5 percentage points in the euro area – especially through pension, healthcare and long-
term care spending. For the EU25, the projected increase is slightly higher compared with the 
previous  projections  in  the  2006  Ageing  Report,  by  around  half  a  percentage  point  of  GDP 
over the whole projection period. Compared to the 2006 Ageing Report, the largest downward 
revisions  in  the  budgetary  impact  of  ageing  have  occurred  in  Portugal,  Hungary  and  the 
Czech  Republic  (reflecting  notably  the  impact  of  pension  reforms),  while  large  upward 
revisions are reported in Greece, Luxembourg, Malta, Estonia, Austria, Poland and Lithuania 
(reflecting primarily revised projected changes in pension expenditure stemming from reform 
reversals and improved modelling techniques). 

Overall, there are notable differences in the impact of ageing across Member States: 

•  The increase in public spending is likely to be very significant (7 percentage points of GDP 
or  more)  in  nine  EU  Member  States  (Luxembourg,  Greece,  Slovenia,  Cyprus,  Malta,  the 
Netherlands, Romania, Spain, and Ireland), although for some countries the large increase 
will be from a fairly low level. 

•  For a second group of countries – Belgium, Finland, Czech Republic, Lithuania, Slovakia, 
the United Kingdom, Germany and Hungary – the cost of ageing is more limited, but still 
very high (from 4 to 7 percentage points of GDP). 

•  Finally,  the  increase  is  more  moderate,  4  percentage  points  of  GDP  or  less,  in  Bulgaria, 
Sweden,  Portugal,  Austria,  France,  Denmark,  Italy,  Latvia,  Estonia  and  Poland.  Most  of 
these  countries  have  implemented  substantial  pension  reforms,  in  several  cases  also 
involving  a  partial  switch  to  private  pension  schemes  (Bulgaria,  Estonia,  Latvia,  Poland, 
and Sweden). 

Demographic  trends  would  push  up  public  pension  expenditure  very  significantly  in  all 
Member  States.  However,  pension  reforms  enacted  in  a  number  of  Member  States  are 
bringing positive results in terms of the sustainability of public finances. Almost all Member 
States  have tightened the eligibility requirements for receiving a public pension, notably by 
raising the retirement age and restricting access to early retirement schemes. Typically phased 
in over a long period, such reforms would lead to higher participation rates of older workers, 
which  may  also  result  from  a  stronger  link  between  pension  benefits  and  pension 
contributions  and  thus  a  greater  incentive  to  remain  in  the  labour  market.  While  the 
employment rates of older workers have been rising in recent years, there is still a lot of room 
for further progress. Only around 50% of people in the EU are still in employment by the age 
of 60. 

Reforms  are  also  leading  to  a  gradually  smaller  share  of  public  pension  benefits  in  overall 
pension  provision.  This  will  happen  through  many  mechanisms,  including  changes  in  the 
indexation  of  benefits  which,  in  some  countries,  cause  benefits  to  rise  more  slowly  than 

EN 

4 

   EN 

wages.  Recent  analysis  suggests  that  future  relative  pensioners'  income  will  decline 
substantially  in  a  number  of  Member  States7.  The  assessment  of  sustainability  of  public 
finances  must  take  into  account  the  risk  of  inadequate  pensions  resulting  in  unforeseen 
pressure for ad hoc increases of pensions or higher demand for other benefits, highlighting the 
need to tackle jointly the issues of pension adequacy and sustainability8. There are examples 
of  Member  States  where  future  adequacy  of  pensions  has  recently  been  improved  without 
endangering financial sustainability (e.g. in Estonia). 

Alongside  reforming  public  pensions  systems,  many  countries  have  introduced,  and  are 
planning  to  expand,  supplementary  pension  schemes.  Some  have  even  shifted  part  of  the 
contribution  from  public  schemes  to  mandatory  funded  and  privately  managed  schemes 
(Bulgaria, Estonia, Latvia, Hungary, Poland, Slovakia and Sweden). At present, these funded 
schemes  are  in  the  build-up  phase,  but  their  share  in  the  overall  pension  package  will  be 
significant in the coming decades. Several countries (e.g. Sweden, Denmark, the Netherlands, 
the UK and Ireland) are already relying to a large extent on private occupational pensions, of 
which some are planning to boost their role further. 

Healthcare systems in the EU are expected to face substantial challenges in the future. Public 
expenditure on health care is projected to grow by 1½ percentage points of GDP in the EU by 
2060. Healthier living can contribute to limiting future spending. Healthcare spending is also 
strongly related to income growth and technological progress. Newly developed methods for 
early  diagnosis  and  treatments  strongly  contribute  to  growth  in  spending,  but  some  of  the 
medical  progress  may  well  be  cost-saving  in  the  long  term.  Investment  in  prevention  and 
health  technologies  offers  instruments  for  the  population  to  stay  healthy  and  productive  for 
longer.  Developing  treatments  for  less  known  pathologies  also  provides  employment  and 
growth  opportunities.  The  effective  management  of  technology  is  therefore  a  major 
determinant of future spending. 

An ageing population will also require increased public spending on long-term care. Based 
on  current  policies,  public  spending  on  long-term  care  is  projected  to  increase  by  1¼%  of 
GDP by 2060 due to the fact that the very old (aged 80+) will be the fastest growing age class 
of  the  population  in  the  future.  Again,  demographic  factors  will  not  be  the  only  drivers. 
Currently, care for the frail elderly is provided, to a very large extent, on an informal basis by 
relatives.  Changes  in  family  structures,  higher  labour  force  participation  of  women  and 
increased geographical mobility, could reduce the availability of informal care. For countries 
whose formal care systems are less developed, the projected increase in public spending on 
long-term care could underestimate future pressure on public finances, due to the likely need 
for increased formal care provision. 

In  terms  of  public  education  spending,  despite  the  decreasing  number  of  children  over  the 
coming  decades,  current  objectives  on  education  policy  and  targets  in  the  EU,  as  well  as  a 
substantial  improvement  in  the  quality  of  education,  may  well  require  higher  educational 
expenditure in the future. Investing in the human capital of young people and adult workforce 
will  be  crucial  to  future  productivity  growth.  Hence,  the  small  decrease  in  the  public 
education expenditure ratio over the projection period in the projections, which results solely 
from  changes  in  the  demographic  composition  (fewer  children  in  the  future)  may  not 
materialize. 

7 
8 

COM (2009) 58 final. 
COM (2006) 574 final. 

EN 

5 

   EN 

                                                 
3. 

PREPARING FOR AGEING IN TIMES OF ECONOMIC RECESSION 

The current financial and economic crisis has led to an unusually sharp and rapid decline in 
economic activity and to a global recession. Employment is being severely hit by the current 
downturn, unemployment rates are rapidly increasing and the EU faces the risk of a decrease 
in its potential growth, already put at risk by population ageing.  

The financial distress and economic downturn are leading to a rapid deterioration of the good 
progress made by Member States in recent years towards balanced government budgets and 
reduced  debt,  as  governments  have  to  intervene  to  stabilise  the  financial  system  and  to 
support the recovery. The short-term outlook for public finances has therefore worsened and 
progress achieved in fiscal consolidation in recent years has been set back.  

Moreover,  the  crisis  adds  to  the  economic  impact  of  demographic  ageing  on  pension 
provision,  although  the  consequences  will  critically  depend  on  the  depth  and  length  of  the 
downturn.  For  public  "pay  as  you  go"  pension  systems,  the  slowing  of  the  real  economy  is 
bringing additional fiscal pressures on financing and contributions. For funded schemes, the 
crisis has exposed their vulnerabilities to the decline in financial markets. In defined-benefit 
schemes, increasing deficits as a result of falls in the value of assets is impacting members of 
the  funds  through  adjustments  to  indexation  rules  or  contribution  rates,  and  the  closure  of 
such  schemes  to  new  members.  For  people  paying  into  defined  contribution  pension  funds, 
the impact of the crisis depends critically on the fund’s asset allocation and the member’s age. 
Older  workers  with  high  equity  exposures  are  the  most  affected  as  they  are  closest  to 
retirement and the value of their assets has fallen.  

This  highlights  the  need  for  policymakers,  regulators  and  supervisors  to  promote  prudent 
management of people’s retirement savings. A careful monitoring and an in-depth and open 
discussion about pension systems in Europe, and in particular a critical review of the relative 
role, design and performance of the private pillar will be necessary.  

In the current juncture, characterized by very subdued economic activity and highly uncertain 
prospects,  Europe’s  ability  to  rapidly  emerge  from  the  downturn  and  address  its  ageing 
challenges lies crucially in the articulation between actions taken to support the recovery and 
longer-term  structural  reforms.  Targeted  and  well  co-ordinated  policy responses,  as  stressed 
by  the  European  Economic  Recovery  Plan,  are  designed  to  promote  "smart"  investment, 
fostering the right skills to promote energy efficiency, clean technologies, and infrastructure 
and  inter-connection  that  will  support  efficiency  and  innovation,  ultimately  enhancing 
Europe's growth potential.  

Clearly, therefore, the first priority must be to implement the EERP so as to ensure that the 
financial crisis and recession will not put the EU permanently on a lower growth path in terms 
of employment and labour productivity, which would also affect its capacity to cope with the 
consequences of population ageing. 

Once  out  of  the  crisis,  the  long-term  prospects  will  also  depend  on  the  degree  of 
determination for a swift return to sound public finances, as recommended in the EERP, and 
the  pursuit  of  reforms  required  by  demographic  change  which  will  now  be  all  the  more 
important to build confidence as part of the exit strategy from the crisis. Equally importantly, 
the  structural  reform  agenda  aimed  at  tackling  the  demographic  challenge  needs  to  be 
strengthened.  This  means  raising  employment  rates  substantially  and,  in  particular,  helping 
and encouraging the ageing baby-boomers to stay in the labour market rather than retire early, 
as previous generations have tended to do. Europe's best chance of ensuring that ageing will 
not be perceived as a threat, but as a historic achievement, lies in not wasting the potential of 
these baby-boom generations.  

EN 

6 

   EN 

The  three-pronged  strategy  to  cope  with  the  economic  and  budgetary  challenges  posed  by 
ageing  populations  decided  by  the  Stockholm  European  Council  in  2001,  i.e.:  (i)  reducing 
debt at a fast pace; (ii) raising employment rates and productivity; and (iii) reforming pension, 
healthcare and long-term care systems, and the five policy goals identified in October 2006 in 
the Commission’s communication on the demographic future of Europe remain a valid long-
term policy strategy9. 

These goals were to: 

•  promote demographic renewal in Europe by creating better conditions for families; 

•  promote employment in Europe with more jobs and longer working lives of better quality; 

•  make Europe more productive and dynamic; 

•  receive and integrate migrants in Europe; 

•  secure  sustainable  public  finances  in  Europe,  thus  guaranteeing  adequate  social  security 

and equity between the generations. 

•  Creating better conditions for families and demographic renewal 

Demographic renewal requires action to develop an overall societal climate receptive of the 
needs of families, a shift towards a children-friendly society and creating conditions allowing 
a better work-life balance. In countries where it is difficult to reconcile work and private life, 
employment rates of women tend to be low, as mothers often drop out of the labour market, 
and  birth  rates  are  low  because  many  people  feel  that  they  cannot  afford  to  have  children. 
Policies to promote reconciliation and gender equality, entailing in particular better conditions 
for  parental  leave  and  incentives  for  fathers  to  take  such  leave,  and  increased  provision  of 
high-quality childcare, should remain a priority. Reducing taxes on second earners could also 
be considered, as they are found to be more responsive to tax reductions as concerns labour 
market  participation.  Such  policies  produce  long-term  benefits  by  ensuring  that  women  in 
particular can remain connected to the labour market. 

However,  most  Member  States  still  fall  short  of  the  targets  to  ensure  access  to  formal 
childcare  set  by  the  European  Council  in  Barcelona  and  fail  to  realise  the  benefits  of  early 
childhood  education  for  the  future  development  of  children  and  for  enhancing  the 
opportunities  of  those  from  disadvantaged  backgrounds.  Investing  in  high-quality  childcare 
and  the  employability  of  parents  who  take  career  breaks  represent  investments  with  huge 
potential  returns.  This  also  provides  an  incentive  to  the  development  of  new  services  and 
hence the creation of new jobs. 

•  More jobs and longer working lives 

Increasing  participation  and  employability.  The  challenge  of  ageing  for  public  finances 
arises  from  the  need  to  support  an  increasing  number  of  older  people  with  a  shrinking 
population  in  employment.  There  is  much  room  for  improvement.  Just  under  two  thirds 
(65.4%  in  2007)  of  the  working-age  population  are  actually  in  employment,  several 
percentage  points  below  the  target  (70%)  set  within  the  Lisbon  Strategy  for  the  year  2010. 
There has been considerable progress to increase participation in the labour market, especially 
among older workers and women. However, the current recession could particularly hit young 
people and older workers. The policy priority must be to ensure that young people who fail to 
enter the labour market will not embark on a life of permanent benefit dependency and that 

9 

COM (2006) 571 final. 

EN 

7 

   EN 

                                                 
dismissed older workers will be able to return to employment once the labour market situation 
improves. 

Reforms in tax and benefit systems have been undertaken over recent years, largely aimed 
at improving the labour utilisation. A central part of many recent reform strategies has been to 
reduce benefit dependency by making work an economically attractive and rewarding option 
compared with welfare and by encouraging beneficiaries to actively seek work. The reduction 
of  disincentives  to  work  and  to  hire,  especially  for  the  low-skilled,  embedded  in  tax  and 
benefit  systems  and  a  greater  link  with  targeted  activation  policies  are  all  factors  that  have 
contributed to the structural improvement in the  functioning of labour markets. Yet, despite 
these improvements, in view of the ageing of the population and rapid technological change, 
more  progress  is  needed  to  further  increase  and  maintain  high  levels  of  employment  and 
participation  rates,  especially  among  female  and  older  workers,  and  to  reduce  structural 
unemployment.  

Raising the employment rates of older workers. Reforming disability and early retirement 
schemes  and  increasing  effective  retirement  ages  remain  a  priority  in  order  to  increase  the 
labour supply of older persons and to contribute to sustainable economic growth in the face of 
adverse  demographic  developments.  This  also  helps  ensure  that  retirement  behaviour  takes 
due account of future increases in life expectancy. The baby-boom generation (now in their 
50s  and  early  60s)  represents  a  major  share  of  Europe’s  labour  force.  Encouraging  them  to 
remain active requires removal of employment obstacles, such as mandatory retirement ages, 
and  introduction  of  flexible  retirement  mechanisms  allowing  them  to  choose  when  to  retire 
and  to  earn  additional  pension  entitlements.  Part-time  employment  opportunities  can  be  a 
good way of achieving adequate incomes for older people and increasing the labour supply.  
Beyond incentives embedded in pension, tax and benefit systems10, the reform strategies must 
include  changing  attitudes  to  older  workers  and  developing  their  skills  and  employability 
through  effective  lifelong  learning.  Suitable  working  conditions  are  needed,  including  more 
flexible working-time and work-organisation, together with employment opportunities for an 
ageing workforce. Such measures should help raise both the employment rate and the quality 
of life of older people. 

A healthier elderly population. A population in better health will be able to work longer as 
it  grows  older,  allowing  higher  productivity  and  labour  participation,  and  will  need  less 
healthcare,  ultimately  resulting  in  decreased  pressure  on  public  finances.  Increasing  the 
healthy life expectancy will be a crucial factor in achieving the Lisbon strategy objective of 
attracting more people into employment and retaining them on the labour market. At the same 
time,  ageing  societies  represent  an  opportunity  for  rapid  job  creation  in  health  and  social 
services and will require activation and training measures. 

•  A more productive and dynamic Europe 

Within  a  decade  from  now,  labour  productivity,  which  depends  largely  on  high  levels  of 
educational  attainment,  will  become  the  main  determinant  of  future  economic  growth. 
However,  13%  of  women  and  17%  of  men  aged  18-24  attain  only  a  lower  secondary 
education  qualification  or  less  and  are  defined  as  early  school-leavers.  This  represents  a 
modest improvement compared to the beginning of this decade, but remains far off the target 
set  for  2010,  namely  to  bring  this  proportion  down  to  10%  at  most.  A  high  level  of 
educational  attainment  is  associated  with  higher  labour  force  participation  and  is  a 
precondition  for  lifelong  learning  and  hence  the  ability  of  older  workers  to  remain  on  the 

10 

See COM(2007) 733 final and 'Employment in Europe 2007'.  

EN 

8 

   EN 

                                                 
labour market. Future productivity growth also depends on technological progress, which in 
turn depend both on universities producing graduates capable of engaging in research and on 
investing  in  research  and  development.  It  also  depends  on  a  swift  adoption  of  new 
technologies by firms and policies to improve Europe's R&D and innovation systems. 

Societies  in  which  people  live  longer  offer  opportunities  for  developing  new  products  and 
services. The growth possibilities in these future markets are large and, as living longer is not 
a  phenomenon  confined  to  Europe,  the  solutions,  products  and  services  developed  can  be 
exported  to  third  countries,  opening  new  markets  there.11  In  addition,  research  and 
development  needs  to  be  geared  towards  developing  more  cost-effective  medical  treatment 
and prevention strategies. It should be combined with stronger incentives for a rational use of 
resources that can significantly reduce spending.  

Europe’s  changing  demographic  composition  can  also  present  an  opportunity  for  the 
development of products and services geared to the needs of older people. New technologies 
can  be  developed  to  allow  older  people  to  stay  autonomous  and  live  longer  in  their  own 
homes,  to  transform  the  delivery  of  care,  inter  alia  personalizing  services  in  response  to 
patients’ unique needs and preferences.12 Investment in education, research and development 
will yield potentially large returns in the future and should not be reduced during the crisis. 
Investment in modernising transport infrastructure, which can help sustain demand during the 
crisis,  will  also  be  required  to  facilitate  access  for  all,  while  strengthening  passenger  rights 
with reduced mobility. 

•  Receiving and integrating migrants  

Immigration from third countries has boosted growth in several Member States. Even though 
the  crisis  will  shrink  labour  opportunities  and  attenuate  labour  and  skills  shortages  in  the 
short-term, a well organised legal immigration policy will have a role to play in filling labour 
shortages in a longer-term perspective. However, integration remains a major challenge and 
also  requires  dealing  with  issues  of  social  cohesion.  Migrants  and  their  descendants  have 
often  lower  levels  of  educational  attainment  or  face  difficulties  in  making  full  use  of  their 
skills. They are thus more likely to be unemployed and more exposed to the risk of poverty. 
Although  European  labour  markets  are  being  placed  under  strain  as  a  result  of  the  crisis, 
worsening  social  conditions  in  their  countries  of  origin  could  still  result  in  the  continued 
inflow  of  migrants  into  the  EU,  who  may  face  more  difficulties  in  finding  a  job.  In  this 
context, integration of migrants and their descendants could become an even greater challenge 
to be addressed also at EU level13 

•  Ensuring sustainable public finances 

According  to  the  latest  projections,  the  increase  in  public  expenditure  is  likely  to  be  very 
significant  for  several  Member  States  (although  in  some  cases  it  will  be  from  a  fairly  low 
level of public spending). For those Member States in which the impact on public finances is 
the highest, there will be a need to carry out reforms of social systems, notably in the field of 
pensions  but  also  in  other  programmes,  mainly  health  care,  to  curb  the  long-term  spending 
trend. 

11 

12 
13 

EN 

aimed 

Regional  initiatives,  such  as  the  Silver  Economy  Network  of  European  Regions  (with  11  European 
regions) already work together to promote the development and marketing of innovative products and 
services 
consumers.  See  Sen@er  webpage  http://www.silvereconomy-
europe.org/network/about_en.htm 
COM (2007) 332 final and COM(2007) 329 final. 
The  recently  created  European  Forum  for  Integration  and  the  associated  dedicated  website 
(http://www.integration.eu) will provide useful tools in this respect. 

at  older 

9 

   EN 

                                                 
There is considerable scope for making healthcare and long-term care systems more efficient. 
Better  value  for  money  in  health  care  and  reduced  health  inequalities  can  be  achieved  by 
strengthening primary care, prevention and health promotion and through better coordination 
and rational  use of  resources. However, in some countries, the health sector remains  under-
resourced14  

The recession must, therefore, not lead to an interruption of the reforms of pension, healthcare 
and long-term care systems or for reducing essential investment in education and research. In 
fact,  decisions  on  reforms  are  now  more  urgent  than  ever.  These  measures  are  crucial  to 
Europe's future economic strength. 

4. 

DEALING WITH THE CHALLENGES 

Action  is  required  across  a  number  of  policy  areas.  Coordination  at  European  level  can 
facilitate  the  exchange  of  best  practices,  develop  synergies  and  reduce  negative  spillovers. 
Moreover,  the  public  finance  dimension  is  addressed  through  the  rules-based  framework  of 
the Stability and Growth Pact. The challenges of ageing should be tackled by building on the 
policy  frameworks  put  in  place  over  the  last  few  years,  in  particular  the  Lisbon  strategy, 
which provides the overall framework for action. 

The  European  Commission's  contribution  to  tackling  the  challenges  would  encompass  the 
following: 

•  Deepening  and  broadening  surveillance  beyond  fiscal  policy  in  order  to  help  better 
integrate structural reform in overall policy co-ordination.15 At the current juncture, this 
includes the monitoring and assessment of the implementation of national recovery plans 
in  the  context  of  the  Stability  and  Growth  Pact.  Particular  attention  will  also  be  paid  to 
enhancing the quality of public finances. Reforms of social expenditure programmes that 
offer  better  income  protection  while  strengthening  incentives  to  work  –  the  flexicurity 
approach  –  would  also  greatly  help  enhance  the  sustainability  and  quality  of  public 
finances while ensuring that budgets support macroeconomic stability.  

•  In the fields of pensions, health care and long-term care, the Commission will continue to 
support Member States in their effort to improve the efficiency and effectiveness of social 
spending, and will continue monitoring the social, economic and budgetary consequences 
of  an  ageing  population  within  the  context  of  the  Lisbon  strategy  and  the  EU's  fiscal 
framework  under  the  Stability  and  Growth  Pact  and  the  open  method  of  coordination 
(OMC)  on  Social  Protection  and  Social  Inclusion.  In  the  field  of  funded  pensions,  the 
Commission intends to work with the Council and the Member States to identify lessons 
for  scheme  design,  regulatory  frameworks  regarding  insolvency  protection,  and  target 
beneficiaries  in  order  to  secure  adequate  and  sustainable  private  pension  provision  in 
Member  States.  In  order  to  limit  the  expected  increase  in  public  expenditure,  policy 
measures which can either reduce disability, limit the need for formal care amongst elderly 
citizens  with  disabilities,  favour  formal  care  provision  at  home  rather than  in  institutions 
or, more generally, improve the cost-effectiveness of long-term care provision, e.g. through 
introduction of eHealth and telecare, must be developed. 

•  In the fields of financial services and taxation, the Commission will swiftly introduce the 
measures outlined in its Communication to the European Council16. Restoring the proper 

14 
15 
16 

COM (2009) 58 final. 
COM 2008) 238 final. 
COM(2009) 114 final.  

EN 

10 

   EN 

                                                 
functioning of financial markets is key not only to ensure they effectively play their role in 
supporting growth and jobs, but also in protecting financial assets of today and tomorrow, 
including supplementary pensions schemes and supplementary health insurance. 

•  In the fields of education, training and R&D, the Commission will continue to work with 
Member States on enhancing the assessment of future skill needs and skill matching at EU 
level and assessing the efficiency of higher education. It will promote the development of 
efficient and equitable education and training systems, with a view to boosting productivity 
in the context of the renewed Lisbon strategy. 

To  conclude,  governments  currently  grappling  with  a  severe  economic  and  financial  crisis 
will also continue to face an expensive demographic transition. Success in tackling Europe’s 
demographic  challenge  continues  to  depend  on  a  thriving,  dynamic  economy  with  rising 
productivity  and  efficiently  functioning  markets.  The  way  forward  in  the  current  difficult 
economic situation therefore consists first of all in taking all the necessary steps to ensure a 
speedy recovery from the recession as outlined in the EERP and in implementing a credible 
exit strategy when the recovery starts. In addition, it is crucial for Member States to invest in 
boosting their longer-term growth potential, as outlined in the Lisbon strategy, for tackling the 
consequences of demographic change. 

There is therefore a strong need to put in place all necessary policies to make sure that the EU 
will emerge from the financial and economic crisis with a solid growth potential and ability to 
make full use of its human resources. For this to happen, it will be essential to implement a 
comprehensive exit strategy built on structural reforms. Notably this will involve prolonging 
working life and increasing participation of youth, women and older workers, reforming tax 
and  benefit  systems  to  make  work  pay  along  the  flexicurity  principle,  reforming  pension 
systems  and  making  health  and  long-term  care  systems  more  efficient,  alongside  the 
necessary  investment  in  education  and  research,  as  well  as  in  child  care.  The  effective 
integration of migrants and their descendants is also important in this context, as is the further 
development of a properly managed policy of legal immigration to meet future labour needs. 
A strong emphasis on these policies at the present juncture will help Europe to both emerge 
more resiliently from the current recession and to address the challenges of an ageing society. 

By  pursuing  vigorously  the  reform  agenda,  by  investing  massively  in  the  quality  of  human 
resources  and  by  removing  barriers  to  the  full  use  of  its  labour  force,  the  EU  can  emerge 
stronger from the current economic crisis. This should therefore be seen as a time for social 
innovation  inspired  by  the  successful  experiences  and  reform  processes  already  in  evidence 
across the Member States. Arguing strongly for reform is not just an economic agenda. It is an 
agenda that will promote good health, good education and good quality of life for current and 
future  generations.  It  is  an  agenda  that  will  allow  Europe  to  look  to  the  future  with 
confidence. 

* * * 

11 

EN 

   EN 

•   

Statistical annex 

Table 1: Long-term labour market developments 

Employment rate (15-64)

Employment rate (55-64)

Participation rate (15-64)

Participation rate (55-64)

Unemployment rate (15-64)

2007 2020 2060
69.9
69.0
65.5

p.p. change 
07-60
4.4

2007
44.9

2020 2060
60.0
54.5

p.p. change 
07-60
15.1

2007 2020 2060
74.1
73.2
70.6

p.p. change 
07-60
3.5

2007 2020 2060
62.5
56.9
47.5

p.p. change 
07-60
15.1

2007 2020
5.7
7.2

2060
5.7

p.p. change 
07-60
-1.5

65.5

69.5

70.1

4.6

42.6

54.8

60.3

17.7

70.8

73.8

74.4

3.6

45.3

57.5

63.0

17.7

7.6

5.9

5.8

-1.7

EU27

EA

Source: '2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008-2060)', 
European Economy, (forthcoming). 

Graph 1: Projected potential growth rates (annual average growth rates), EU aggregates 

4,5
4,0

3,5
3,0
2,5

2,0
1,5
1,0

0,5
0,0

A
E

5
1
U
E

5
2
U
E

7
2
U
E

0
1
U
E

2007-2020

2021-2040

2041-2060

Source: '2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008-2060)', 
European Economy, (forthcoming). 

EN 

12 

   EN 

 
 
Table 2 - Age-related government expenditure, 2007-2060, percentage point change of GDP 

P ens ions

Hea lth c are

Le ve l

Cha ng e 

Le vel

Ch ang e 

Long-term  care
L evel

Chan ge 

Une mployme nt benefits
Cha nge  

Le vel

E ducation

Total 

Level

Chan ge  

Leve l

Cha nge  

BE

BG
CZ

DK
DE

EE
IE

G R
ES

FR
IT
CY
LV

LT
LU

HU
M T

NL

AT
P L

P T
RO
SI

SK

FI
SE

UK
EA

E U27
E U15
E U10
E U25

200 7
10 .0

8.3
7.8

9.1
10 .4

5.6
5.2

11 .7
8.4

13 .0
14 .0

6.3
5.4

6.8
8.7

10 .9
7.2

6.6

12 .8
11 .6

11 .4
6.6

9.9
6.8

10 .0
9.5

6.6
11 .1

10 .2
10 .2

9.7
10 .2

200 7

206 0
4.8

3.0
3.3

0.1
2.3

-0 .7
6.1

12 .4
6.7

1.0
-0 .4

11 .4
-0 .4

4.6
15 .2

3.0
6.2

4.0

0.9
-2 .8

2.1
9.2

8.8
3.4

3.3
-0 .1

2.7
2.8

2.4
2.4

1.0
2.3

20 07
7.6

20 07

20 60
1.2

20 07
1.5

20 07

20 60
1 .4

20 07
1.9

200 7

206 0
-0.4

2 007
5 .5

2 007

2 060
0 .0

2 00 7
26.5

4.7
6.2

5.9
7.4

4.9
5.8

5.0
5.5

8.1
5.9

2.7
3.5

4.5
5.8

5.8
4.7

4.8

6.5
4.0

7.2
3.5

6.6
5.0

5.5
7.2

7.5
6.7

6.7
6.9

4.9
6.8

0.7
2.2

1.0
1.8

1.2
1.8

1.4
1.6

1.2
1.1

0.6
0.6

1.1
1.2

1.3
3.3

1.0

1.5
1.0

1.9
1.4

1.9
2.3

1.0
0.8

1.9
1.4

1.5
1.5

1.4
1.5

0.2
0.2

1.7
0.9

0.1
0.8

1.4
0.5

1.4
1.7

0.0
0.4

0.5
1.4

0.3
1.0

3.4

1.3
0.4

0.1
0.0

1.1
0.2

1.8
3.5

0.8
1.3

1.2
1.3

0.4
1.2

0 .2
0 .4

1 .5
1 .4

0 .1
1 .3

2 .2
0 .9

0 .8
1 .3

0 .0
0 .5

0 .6
2 .0

0 .4
1 .6

4 .7

1 .2
0 .7

0 .1
0 .0

1 .8
0 .4

2 .6
2 .3

0 .5
1 .4

1 .1
1 .2

0 .6
1 .2

0.1
0.1

1.0
0.9

0.1
0.8

0.3
1.3

1.2
0.4

0.3
0.2

0.1
0.4

0.3
0.4

1.1

0.7
0.1

1.2
0.2

0.2
0.1

1.2
0.9

0.2
1.0

0.8
0.8

0.2
0.8

0 .0
0 .0

-0.2
-0.3

0 .0
0 .1

-0.1
-0.4

-0.3
0 .0

-0.1
0 .0

0 .0
0 .0

-0.1
0 .0

-0.1

0 .0
-0.1

-0.4
0 .0

0 .0
-0.1

-0.2
-0.1

0 .0
-0.2

-0.2
-0.2

0 .0
-0.2

3 .3
3 .5

7 .1
3 .9

3 .7
4 .5

3 .7
3 .5

4 .7
4 .1

6 .1
3 .7

4 .0
3 .8

4 .4
5 .0

4 .6

4 .8
4 .4

4 .6
2 .8

5 .1
3 .1

5 .7
6 .0

3 .8
4 .2

4 .3
4 .3

4 .2
4 .3

-0.2
-0.3

0 .2
-0.4

-0.2
-0.3

0 .0
0 .1

0 .0
-0.3

-1.2
-0.3

-0.9
-0.5

-0.4
-1.0

-0.2

-0.5
-1.2

-0.3
-0.5

0 .4
-0.8

-0.3
-0.3

-0.1
-0.2

-0.2
-0.1

-0.8
-0.2

16.6
17.9

24.8
23.6

14.3
17.2

22.1
19.3

28.4
26.0

15.4
13.2

15.8
20.0

21.6
18.2

20.5

26.0
20.5

24.5
13.1

22.9
15.2

24.2
27.2

18.9
24.3

23.1
23.5

19.2
23.3

200 7

206 0
6.9

3.7
5.5

2.6
4.8

0.4
8.9

15 .9
9.0

2.7
1.6

10 .8
0.4

5.4
18 .0

4.1
10 .2

9.4

3.1
-2 .4

3.4
10 .1

12 .8
5.2

6.3
2.6

5.1
5.2

4.7
4.8

2.1
4.7

BE

BG
CZ

DK
DE

EE
IE

GR
ES

FR
IT
CY
LV

LT
LU

HU
MT

NL

AT
PL

P T
RO
SI

SK

FI
SE

UK
EA

E U27
E U15
E U10
E U25

Source: '2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008-2060)', 
European Economy, (forthcoming). 

EN 

13 

   EN 

 
Graph 2 - The Cost of Ageing in ’09 and ’06 compared, p.p. of GDP, 2007-50 

GR

LU

Higher increase

SI

MT

LT
IT

AT

LV

DE
SK
FR

SE

4.0

NL

FI

IE

BE

ES

CY

Lower increase

UK

DK

HU

CZ

PT

9.0

14.0

14.0

9.0

4.0

-1.0
-1.0

-6.0

R
A
9
0
0
2

EE

-6.0

PL

Source: '2009 Ageing Report: economic and budgetary projections for the EU-27 Member States (2008-2060)', 
European Economy, (forthcoming). 

2006 AR

EN 

14 

   EN