Curbing pension spending “essential” – Trichet
EUROPE – The president of the European Central Bank, Jean-Claude Trichet, has said curbing pension spending is “essential” to cut non-wage costs and ensure social security sustainability.
Trichet said that the implementation of labour market reforms have been “uneven” so far in the euro area. “These measures have to go hand in hand with product market reforms and reforms of the pension and health care system,” the former governor of the Bank of France said in a speech.
Trichet told the European Institute in Washington: “Such reforms are essential to contain expenditures on pensions and health care.”
“They will not only be needed to reduce non-wage labour costs and increase incentives for job creation but also to ensure the sustainability of the social security systems.”
Trichet said there are three current priorities facing the euro area: enlargement, structural reform, and the need to implement “an original concept of fiscal surveillance in a single currency area”.
Last week ECB vice president Lucas Papademos said pensions spending should be included in the way the sustainability of public finances is measured.
Papademos said that more flexible labour market would help more people decide to work. “And indeed, this would be one important response to the mounting problems related to the ageing of the European population.”