Council conclusions on the sustainability of public finances in light of ageing populations
The Council adopted the following conclusions:
1. The economic and financial crisis has put a significant burden on public finances and
has led to rising deficits and debt levels. Ensuring the long-term sustainability of
public finances is therefore particularly important at the current juncture. The Council
STRESSES the need for appropriate growth friendly fiscal consolidation and for
further implementation of structural reforms in order to enhance the sustainability of
public finances.
2. Against this background, the Council ENDORSES the 2015 Ageing Report: economic
and budgetary projections for the 28 EU Member States and Norway (2013-2060)
prepared by the Economic Policy Committee (Ageing Working Group) and the
Commission (DG ECFIN) on the basis of commonly agreed methodologies and
assumptions. In line with previous editions, the projections in the 2015 Ageing Report
cover public expenditures on pensions, health care, long-term care, education and
unemployment benefits.
3. The Council HIGHLIGHTS the main findings of the 2015 Ageing Report:
- Over the whole period 2013-2060, average annual GDP growth in the EU is
projected to be 1.4%, unchanged compared to the 2012 Ageing Report. However,
there are significant differences in the growth potential across Member States.
- Total age-related public expenditures are projected to increase by 1.4 p.p. of GDP
between 2013 and 2060 in the EU, to reach 27% in 2060, with large differences across
countries. Excluding unemployment benefits (strictly-age-related expenditure), an
increase of 1.8 p.p. of GDP between 2013 and 2060 is projected in the EU, to reach
26.3% in 2060.
- Taking into account possible more adverse macroeconomic assumptions, such as the
TFP risk scenario, strictly ageing-related public expenditures could increase by 2.1
p.p. of GDP between 2013 and 2060. As a result of recent reforms and more benign
demographic developments projected for the EU as a whole in EUROPOP2013, the
projected increase in the total age-related expenditure over 2013-60 is now
significantly lower than projected in 2012 (3.3 pp. of GDP).
- After a projected increase up to 2040, also related to the baby boom generation
reaching the retirement age, public pension expenditure is projected to return close to
its 2013 level by 2060 (11.3 % of GDP for the EU). The diversity across Member
States is very large, depending on the degree and timing of population ageing, the
specific features of national pension systems and, notably, countries' progress with
structural reforms. In most countries, recent pension reforms have had a visible
positive impact by containing public expenditure dynamics. Pension reforms have also
contributed to an increase in the effective retirement age and thus labour input. The
scale of reforms in some Member States is however still insufficient to curb the
increase in public pension expenditure.
- Public expenditure on health care and long-term care is projected to increase by 2
p.p. of GDP between 2013 and 2060 in the EU in the AWG reference scenario with
considerable differences across countries, reaching 10.6 % of GDP in 2060, which is
mainly due to demographic developments. Taking into account possible future
developments in non-demographic cost drivers in health care and long-term care
spending, as foreseen in the AWG risk scenario, the projected increase in care-related
spending could even reach 4 p.p. of GDP between 2013 and 2060.

4. In light of the updated age-related expenditure projections and the current economic
situation, the Council, while welcoming recent reforms in many Member States,
REAFFIRMS that there is a need to continue appropriate policy action in the EU in all
age-related areas, notably pension, health and long-term care reforms while taking into
account country specificities, and to avoid measures resulting in the reversal of
sustainability enhancing reforms already undertaken. This entails a prompt
implementation of the Country Specific Recommendations issued under the European
Semester and of the three-pronged strategy for addressing the economic and budgetary
consequences of ageing, i.e. by reducing government debt, raising employment rates
and productivity, and reforming pension, health care and long-term care systems.
5. The Council HIGHLIGHTS specifically that further steps still need to be taken by
Member States, though to varying degrees, to raise the effective retirement age,
including by avoiding early exit from the labour market and by linking the retirement
age or pension benefits to life expectancy. Moreover, the Council, recalling its
Conclusions of 7 December 2010, INVITES Member States to balance the need to
provide universal health care and long-term care, meet an increasing demand related to
an ageing population, as well as growing patient expectations due to technological
development in the coming decades with the need to reduce high public debt levels.
This highlights the need to assess the performance of health and long term care
systems and implement sound and necessary reforms in order to achieve a more
efficient use of public resources as well as the provision of high quality health and
long term care.
6. The Council INVITES the Commission to factor these findings related to ageing
challenges and other relevant information including updated estimates of nearer-term
potential GDP growth[1] into its analysis and surveillance under the European
Semester, and to take account of its implications in all relevant fields of economic
policy coordination in the EU.
7. The Council INVITES the Commission to undertake its regular in-depth overall
assessment of the sustainability of public finances by the end of 2015 using this set of
comprehensive and comparable updated projections. The Economic Policy Committee
should on the basis of the assessment report back to the Council.
8. The Council INVITES the Economic Policy Committee to update, on the basis of new
population projections to be provided by Eurostat, in close cooperation with the
National Statistical Institutes (NSIs), its analysis of the economic and budgetary
implications of population ageing by the autumn of 2018. Moreover, the Council
INVITES Eurostat to systematically provide annual updates of their population
projections, in particular as regards migration flows, to be used over the short to
medium term forecast horizon.

[1]
On April 1st 2015 the EPC endorsed a revised approach to projecting population
growth for the purposes of potential GDP estimation for Ireland, Latvia and Lithuania.