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Wednesday, August 27, 2003

European Pension Ages on the Rise

Interesting piece from the Guardian about how the German and Italian governments seem set to raise the retirement age. Obviously I find no fault with this, it is both necessary and inevitable, in fact I imagine it is only the begining. The problem could be a motivational one, and hence a productivity problem. In addition, it is one thing taking a decision at government level, and another implementing the same decision at firm level.

The Italian and German governments risked a public outcry yesterday by proposing that people should work, and make pension contributions, for up to five years longer to help pay for their ever-growing number of pensioners.
The proposals come as countries across Europe struggle to defuse the "demographic timebomb" of falling birthrates and rising life expectancy. The Italian prime minister, Silvio Berlusconi, said Italians should retire at 62, five years later than the average. Under the current system, he said, Italy began each year with a €36bn (£25bn) pension deficit. "In Italy people retire on average at 57. It means unsustainable costs and an annoying loss of talent, which could end up sinking us," he told the rightwing newspaper Libero. He proposed that the retirement age should be gradually raised to 60 by 2010, and after that to 62..............

In Germany a government commission has recommended raising the average retirement age to 67 and increasing pension contributions by 2.5%. It also suggested that no one should be allowed to retire before the age of 64. Italy and Germany are under growing pressure to overhaul their pensions systems in an effort to meet EU budget deficit regulations. Both had more deaths than births in 2002, and their national workforces are unable to pay for the growing numbers of pensioners. Italy has one of the oldest populations in the world, together with Greece and Japan, and one of the lowest birthrates, second only to Spain's. Pensions cost Italy about 15% of its GDP and have been a growing strain on the struggling economy for the past decade. But when Mr Berlusconi last tried to talk Italians into working longer - during his fleeting first government in 1994 - it was met by a million protesters on the streets, and it contributed to the collapse of his coalition government after less than eight months. The German recommendations put further pressure on the government, implying that its attempt to reform the pension scheme in 2001 has been a flop.
Source: The Guardian

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