EUROPE – The onset of population ageing in the euro area will occur in the next business cycle, says the International Monetary Fund.
The IMF said that, whatever the concerns about cyclical risks, the euro area's "real" growth problem is long term.
“The onset of rapid population aging is only one business cycle away, and, other things being equal, portends both a sharp slowing in longer-term growth and financially troubled welfare systems,” the fund said in a report on the euro area.
It said: “Within this context of historic achievements, this year's consultation provides another opportunity to ponder why the euro area is seemingly unable to deliver robust growth, both from a shorter- and longer-term perspective.”
It added: “With rapid population aging no longer the distant event it once was, providing answers to this question is becoming ever more pressing.”
The report said spending could be discouraged in part by “the increasing realization that welfare state promises will be difficult to fund in an ageing society”.
The IMF said: “Looking ahead, slowing potential growth and unfavorable demographics will increasingly strain the delicate balance between social cohesion and financial discipline, a balance that has underpinned policy consensus in the postwar period.”