Retirement pensions and sovereign debt in the euro area

The debt problem in the euro area is being exacerbated by burdens on pension systems caused by demographic change. However, substantial reforms have been instigated recently, including in EMU periphery countries, and these reforms are expected to bring some relief to public finances in the medium term.

The crises of the last few years have not left funded retirement pension systems untouched and the recent turmoil will add new scars. However, capital-based pension provision remains indispensable because it promises higher returns than pay-as-you-go systems over the longer term in ageing societies.