EUROPE – The chief economist of the European Central Bank, Otmar Issing, says that much remains to be done if European pension systems are to be made sustainable.
“While several member states have initiated pension reforms moving in the right direction, in particular by reducing incentives for early retirement, much remains to be done to ensure that pension systems are sustainable in the long term,” Issing said.
“The ageing of the population will place an increasing burden on the shoulders of those of working age unless corrective measures are undertaken in a timely manner,” the ECB board member said in testimony before the European Parliament’s Committee on Economic and Monetary Affairs in Brussels today.
He highlighted three issues facing Europe – the “unacceptably high” level of structural unemployment, “modest” productivity, and population ageing. The last factor had “created a demographic situation that will place pension systems under severe strain if corrective action is not taken”.
He welcomed the European Commission’s attempts to make Europe more competitive, the so-called Lisbon Agenda – though he was not confident about progress.
“Are we well on track towards achieving the Lisbon goals? I am afraid not,” he told MEPs. “There is too little momentum in the implementation of structural reforms in the euro area.”
“Structural reforms are key to future economic success in the euro area,” Issing said. “Indeed, the recent debate on the possible adverse effects of the appreciation of the euro is nothing more than a reminder of the structural problems of the euro area.”
“Such concerns illustrate the euro area economy's lack of flexibility and consequent vulnerability to external shocks.”