The vice president of the European Central Bank, Lucas Papademos, says pensions spending should be included in the way the sustainability of public finances is measured.
He says the implementation of the rules and procedures of the existing fiscal framework could be improved. “A good example is the assessment of the long-term sustainability of public finances.”
Speaking in Madrid recently, he saids the Maastricht Treaty’s stipulation that member states’ debt levels should be kept below 60% of GDP was a “useful benchmark”.
“But a comprehensive assessment of long-term sustainability clearly needs to go beyond reliance on a single indicator.
“It also needs to be forward-looking taking into account future liabilities, especially as regards spending on pensions and health care, which can be expected to increase substantially as a result of ageing populations.” But he said the measurement of such liabilities is “shrouded with methodological difficulties and subject to a high degree of uncertainty”.
Papademos said that more flexible labour market would help more people decide to work.