Politicians in denial over future of pensions

By Anna McLauchlin

Date: 09/12/04

EUROPE'S governments will never meet the challenge of their ageing population unless they make the public aware of how serious the problem is, the secretary general of the Organization for Economic Cooperation and Development (OECD) has warned.

Donald Johnston said that one of the main problems with facing up to the need to tackle health care regimes and working time was the short-term vision of politicians.

"No politician is going to run on pension benefits because he won't get the votes," Johnston told European Voice.

"We must take a pedagogical approach because both sides of the house have to recognize that there is a problem."

Johnston added that because the problem is not yet seen as critical, there is a lack of political will to confront it. But the effects of ageing will be seen sooner than expected, he says.

By 2050, the average dependency ratio - the inactive population relative to the total labour force - among OECD countries will be almost 140%.

"We have to start withdrawing some of our benefits and we have to start doing it very soon," he warned.

But he said that it would be difficult to reach a consensus in Europe because the problem takes a different shape in each member state.

For example, the OECD has found that, in Austria, every second man over 50 retires on disability grounds, while Sweden is facing a significant rise in the number of older people on long-term sick leave.

According to OECD studies, the answer lies in a range of measures including promoting fertility, increasing working life and reducing pension benefits.

But Johnston warns that these will not work unless tax benefits and childcare help families to "marry" their work and home lives.

The organization claims that increasing migration levels could also help to alleviate the impact of declining fertility, but that this is not a panacea.

France, for example, would have to attract 90 million migrants by 2050 to maintain the same 'dependency ratio' as it had in 1995.

Johnston, who was a minister in the Canadian government during the 1980s, also pointed to that country's solution of wiping out its fiscal deficit to give it more leeway for managing its public finances.

"When I was in government people were constantly saying that deficits matter," he said.

"We have this huge problem in Europe and we don't have the wherewithal to deal with it."

In an interview with European Voice the secretary general of the Organization for Economic Cooperation and Development (OECD), Donald Johnston, said that Europe's governments would never meet the challenge of their ageing population unless they made the public aware of how serious the problem was. He further said that one of the main problems with facing up to the need to tackle health care regimes and working time was the short-term vision of politicians.

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