Europe’s Golden Age is going Grey

Civitas, 2 June 2010

An EU Commission paper on pensions argues that no more than a third of our adult lives should be spent in retirement writes Natalie Hamill. This means that by 2060, according to current trends, we should expect to be retiring at 70.

The next few years look rather bleak, as member states grapple to get their national finances in order. With credit ratings slipping and austerity measures becoming more widespread, governments are scrambling to find ways to cut their deficits and implement drastic public spending cuts. Retirement reforms will be an area of high priority.

Across the EU, birth rates and mortality rates have decreased, and life expectancy is rising.   These demographic changes mean we cannot realistically expect Europe’s “golden retirement” era to continue. At the moment there are 4 workers for every retiree. By 2050 it is likely this figure will have doubled –in fact 40% of the EU population will be aged over 60.

So most EU governments have reluctantly agreed with the Commission’s conclusion; that the retirement age must be raised regularly so that workers don’t face a “painful combination of smaller payouts and higher contributions”, the citizens of Europe have not. The Dutch and Spanish grumbled at the idea a few months ago. Now the French, as famed for their 35 hour working week as for their croissants, are the latest to protest, after the French Government announced that the retirement age must be raised to 63. Despite the strikes last week President Sarkozy is adamant; the pension system in France is close to bankruptcy (currently £27 billion in deficit) and therefore the age must be raised. France has the lowest retirement age in the EU, and given the economic climate, it cannot justify this anymore.

But whilst French workers huff and puff on strikes in Paris, they should spare a thought for the hard-working Germans, pillar of the EU, and (as they always feared) now a crutch of the Eurozone. Contributing the largest proportion of the Greek bailout has damaged the German government’s standing with its citizens and frustration is simmering at the injustice of their working hard and retiring at 67, but having to pay for the, previously, comfortable retirements of the Greeks at 61.

In Greece, strikes and violent protests have plunged the country into chaos; but few of the austerity measures have caused as widespread outrage as the proposal to raise the retirement age to 63. Prime Minister Papandreou has no choice, he must cut public spending or he won’t get the rest of his bailout. Greece cannot finance the “golden” retirements its citizens expect, and other countries shouldn’t be asked to.

Although some countries accepted the necessity of a higher retirement age years ago (Denmark is also set at 67), others are complaining about increases that will still leave them with more retirement years than their neighbours. The highly contentious nature of the issue means EU-wide agreement is unlikely, so it is up to the individual states to convince their citizens that the good times don’t come for free, and that perks must be paid for. In this economic downturn, if we want to enjoy the fact that we are living longer then we need to accept that we should tighten our belts and work a little longer.