of gdp in both the eu - 25 and the eu15 over the same period, reflecting the implementation of important pension reforms in many of these countries according to esa95, defined - contribution funded pension schemes are not considered as part of the general government sector. these projections were first published in the greek report on pension strategy ( ministry of economy and finance - ministry of labour and social security, september 2002 ) and reproduced in the 2004 update of the hellenic stability and growth programme 2004 - 2007 – revised ( march 2005 ). initially, pension expenditure had been projected to reach 24. 8 % of gdp in 2050 ( see : ministry of labour and social security, actuarial report on the greek social security system – report of the government actuary department uk, 19 april 2001 ; also : european commission, economic policy committee, budgetary challenges posed by ageing populations, epc / ecfin / 655 / 01, brussels, 24 october 2001 ). the downward revision in 2002 reflected the more favourable demographic data obtained from the 2001 census, estimates and assumptions of a faster decrease in rural population, assumptions of a faster reduction in unemployment, more conservative assumptions with regard to annual increases in pensions, and the parametric changes introduced by law 3029 / 2002. the new data affected the projection in more than one way. for instance, the presence of immigrant workers and the migration of rural populations to urban centers imply higher current ika revenues, but also higher future expenditure. since the 1990s. total old age - related expenditures are projected to rise by about 3½ percentage points of gdp in both the eu - 25 and the eu15. 6 long - term fiscal sustainability population ageing will have a significant impact on economic growth and lead to pressures to increase public spending. in order to gauge the magnitude of this challenge, the assessment of long - term sustainability of public finances has become part of the regular eu budgetary surveillance. according to the commission, in the absence of reform measures and budgetary consolidation, a considerable “ sustainability gap ” of about 3. 5 % of gdp, i. e., a gap between the structural budgetary position in 2005 and a sustainable fiscal position, emerges in both the eu and the euro area. 7 unless measures are taken to fill this gap, the government debt / gdp ratio is projected to remain above 60 % over the coming decades for the eu as a whole and, from around 2020, to start rising considerably, reaching almost 200 % of gdp in 2050.

a result of these employment trends, and on the basis of consistent - across - countries assumptions on productivity growth, potential gdp growth is projected to decline in the decades to come. for the eu15, the annual average potential gdp growth rate will fall from 2. 2 % in the period 2004 - 2010 to 1. 3 % between 2031 and 2050. an even steeper decline is foreseen in the new member states ( eu10 ), because of both demographic developments and the underlying assumption that productivity growth rates in these countries will converge to those of the eu15. in greece, that convergence is also expected to lead to a fall in productivity growth, contributing to a decline in potential gdp growth from an annual average rate at 2. 2 % in the period 2004 - 2010 to below 1 % per year in the 2030s and 2040s. public spending projections population ageing is projected to lead to increases in public spending in most eu member states by 2050 on the basis of current policies although there is wide disparity in those increases across countries. in more than one third of the member states, the long - term budgetary impact of the projected increases will be at least 5 % of gdp. these countries have so far made only limited progress in reforming their pension systems or are experiencing maturing pension systems. for the new member states ( eu10 ) as a whole, the increase is projected to be much smaller, but this situation reflects mainly institutional changes. a switch to private pensions scheme in poland is expected to make a substantial contribution to a decline in public pension spending in the new member states. 4 excluding poland, age - related spending is subject to increase by more than 5 % of gdp. most of the projected increase in public spending will be on pensions, health care and long - term care. offsetting savings in areas as education and unemployment benefits are likely to be limited. with respect to greece, data on public spending projections are not available as such projections have not yet been submitted. however, according to projections prepared in 2002, pension expenditures will rise from 12. 4 % of gdp in 2005 to 22. 6 % of gdp in 2050. 5 the net increase in total old age - related expenditure ( excluding spending on long - term care, for which no official figures are available ) is projected to be 11. 5 percentage points of gdp, reaching 32. 7 % of gdp in 2050. this compares with rises in pension expenditures by slightly more than 2 percentage points