PracticeConsultingAgeing popualtion will cause growth rates to tumble

Ageing popualtion will cause growth rates to tumble

Economic growth rates across the European Union look set to fall rapidly after 2010 as a result of the zone's ageing population, according to a report by economists at PricewaterhouseCoopers.

It is estimated that as a result of a fall in the proportion of people of working age, European GDP growth could fall from current levels of 2-2.5% to about 1-1.5% in ten year’s time. PwC believes the effects will be felt hardest in Italy but less so in France and the UK.

Plans to relieve public finances by reforming state pensions will not alone be enough to offset the demographic shift which can be expected in the next decade, the report argues.

Instead PwC suggests European governments consider a package of measures including lightening the burden of taxes on employment and social security contributions, encouraging higher female employment rates, using policies to help unemployed people back into work and discouraging centralised bargaining that fails to reflect labour market locality.

The report also suggests building on the significant developments made in the energy, IT, communications and financial services sectors with policies designed to enhance competition and innovation.

Head of Macroeconomics at PwC John Hawksworth said: ‘A smaller workforce needs to be more flexible and effectively used, and to make optimum use of new technology, if the European economy is to maintain anything like the growth rates it has been used to in the second half of the 20th century.’

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