An old age crisis is approaching in most of Europe.

The need for change is clear and the voices in favour are getting louder. We should try to cope with the crisis in an efficient and socially acceptable way. The guiding principles should be that the elderly must be able to retire with financial security; young workers cannot be overburdened, and the economy should not suffer unduly.

It is now widely accepted that unfunded state pensions have to take a step back and that funded schemes should be encouraged and become more widespread. Perhaps that cannot remove the impact of ageing but it can make it a lot easier to finance and to carry.

In the past the EU Commission has been unable to push an EU-wide pension reform, particularly related to the funded pillar, through the European Council. The irony is that those countries - such as France, Germany, Italy and Spain - most in need of reform because their state pension promises far exceed what they can deliver were also the least co-operative with the Commission’s initiatives.

All this is changing quickly. Whereas pensions, and particularly state pensions, were practically a taboo subject until recently, the awareness of the need for change is growing by the second. Again there is the irony that this awareness is growing particularly in the countries so opposed to the Commission’s proposals in the past.

There is hope, almost certainty, that pensions will be much higher on political agendas from now on. The Commission was right, in our view, to take the matter up again and to prepare a green paper. This will be issued in the near future, backed by the three commissioners in charge of all subject matters related to pensions (the internal market, financial institutions and taxation; economic and monetary policy, plus the introduction of the euro/EMU, and social affairs). The green paper is therefore expected to have significant impact and political weight. This is all the more important because the Commission will have to sell” it to the member states, as well as at the highest political, employer and trade union levels throughout Europe.

The green paper is expected to offer a thorough analysis of the highly complicated and widely differing pension systems throughout the EU, particularly related to the second pillar - that is, essentially funded provisions on group levels above the first pillar of social security provision. It will draw up an inventory of the differences and similarities between countries and systems. It will ask questions on a series of matters to which the industry - pension funds, insurance companies, banks, investment funds, money managers and all other interested parties - will have an opportunity to respond. This will enable the Commission to define in which areas progress can be made and to take appropriate policy initiatives, whether by directives, recommendations or communications, depending on the subject matter.

This is not a minute too soon. Progress is vital, since pensions affect all EU citizens, as well as economic growth and therefore indirectly job creation and capital markets. Not reforming pensions could lead to disruption and could seriously destabilise all previous and future painful efforts to introduce the EMU successfully and to make that success an enduring one.

The recent, admittedly modest, moves to a funded pillar on top of PAYG in France and Italy, two nations with excessive PAYG promises, are signs that things are changing for the better.