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ECB wants fiscal measure to account for pensions

EUROPE – 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 said 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 at the Banco de España in Madrid earlier this week, he said 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”.

The comments come as the European statistical office Eurostat said: “Almost half of EU expenditure is on old age and survivors.” Italy led the way, with 62% of its expenditure on this area, Eurostat said.

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.”

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