European governments “grappling with the severe economic and financial crisis” still need to prepare for the costs of an ageing population, the European Commission has warned.
In a communication dealing with the impact of an aging population in the EU, the Commission warns that if governments do not address work, pensions, health and social care issues they will face significant additional costs and even cause tensions between generations.
The latest message on ageing says healthcare systems are likely to face “substantial challenges in the future” with public expenditure on healthcare likely to grow by 1.5% of GDP across the EU by 2060.
It also warns that long-term care systems are likely to face even more substantial challenges, with public spending on long-term care projected to rise by 1.25% of GDP in the same timeframe.
Countries that rely on informal care for the very elderly are likely to be particularly badly hit, as there are fewer working age people in the population and those that are available are pulled into work to maintain GDP and personal incomes.
“In order to limit the expected increase in public expenditure, policy measures which can either reduce disability, limit the need for formal care or improve the cost effectiveness of long term care provision – eg through the introduction of eHealth and telecare – must be developed,” it says.
The communication – also known as the 2009 Ageing Report – says that because of low birth rates, rising life expectancy and immigration, the EU population will be the same size but significantly older in 2060.
It repeats earlier projections that the proportion of working age people to the proportion over 65s in the population is likely to drop from four to one to two to one, as almost 20m people leave the workforce.
This will reduce the opportunities for growth. Yet age-related public expenditure is expected to grow by up to 5% of GDP across Europe because of increased demands for spending on pensions, healthcare and long term care.
The communication says spending on healthcare can be limited if the population is helped to stay healthy and productive, so the effective management of new drugs and other technologies “is a major determinant of future spending.”
The communication gives EU governments a “window” of ten years to prepare for the real onset of ageing. “Success in tackling Europe’s demographic challenge continues to depend on a thriving, dynamic economy with rising productivity and efficiently functioning markets,” it concludes.
“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 and in implementing a credible exit strategy… built on structural reforms… for tackling the consequences of demographic change.”