GERMANY – The European Commission says Germany’s Agenda 2010 reform plans may not be enough to offset the impact of ageing.

“Although such reform steps are welcomed, the expected effects may not suffice to offset the long-term demographic impact on pension and health care expenditures,” the Commission said in a review of Germany’s updated stability programme.

It said that, according to its own quantitative indicators and on the basis of current policies, the ageing of Germany’s population would result in the ratio of debt to gross domestic product increasing “substantially” after a period of 20 years.

It said Agenda 2010 should raise the growth potential and mitigate budgetary problems. “However, further reform efforts are required.”

Germany submitted the programme in December 2003 and an addendum on January 29. Until the plan, the general government deficit is projected to decline from an estimated 4.0% of GDP to 3¼ % of GDP in 2004 and 2½ % of GDP in 2005, bringing the excessive deficit situation to an end in that year.

But the Commission said there are two risks to this scenario. “Namely the possibility of lower growth in 2005 and that of expenditure overruns related to pensions, the health sector and unemployment related payments”.

It said the German authorities have confirmed their commitment to implement additional measures if necessary in order to bring the deficit below 3 % by 2005.

The European Council is expected to adopt a formal opinion on the updated Germany stability programme on March 9.

The Commission also released its response to the stability programmes of Portugal, Spain and Belgium.

It said Portugal needed “further measures in the area of pension reform are necessary to complete the reform process initiated in 2001 and secure the long-term sustainability of age-related expenditure in the face of an ageing population”.

As for Spain: “Although Spain is relatively well placed to cope with ageing, a major reform of the public pension system is needed to complement increasing employment rates and debt reduction.”

The Commission said that Eurostat was still considering whether the transfer of the Belgacom pension fund to the Belgian state could be counted as a reduction in government deficit. The budget was also