European Pensions Are Out Of Control
April 28, 2000
European countries -- particularly Italy, Germany and France -- are pursuing lavish pension policies that officials fear will eventually lead to bankruptcy. Experts warn that today's retirees are consuming their children's future -- futures which will demand either massive new taxes or huge spending cuts.
- By 2025, an estimated 113 million Europeans -- nearly one third of the population -- will be pensioners.
- Three inescapable factors are propelling the looming crisis: women are having fewer children, workers are retiring earlier and there are few private alternatives to supplement taxpayer-financed systems in most countries.
- The European Union -- which now has 105 million more people than the U.S. -- will have 18 million fewer by 2050 as Europe shrinks and the U.S. grows.
- Fifty year ago, Europeans worked seven years longer than they do now -- and lived 11 years less.
Private pension plans such as 401(k)s are illegal in France due to union objections. Italy is only now starting tax-favored savings funds. And while corporate pensions cover half of German workers, their financial solvency is questionable.
According to Merrill Lynch, only 7 percent of EU workers are covered by corporate pensions and only 0.9 percent by private savings plan equivalent to 401(k)s. So nearly all workers will be entirely dependent on government-paid retirement benefits.
Source: Anne Swardson, "Pensions Threaten European Economies," Washington Post, April 25, 2000.
Browse more articles on Tax and Spending Issues