Pension reform key for European economy – IMF

EUROPE - The International Monetary Fund says structural reform, in particular of the pension system, is vital for Europe to achieve medium-term economic sustainability.

“I think more and more we have reached the point where structural reforms are the first line of defence,” said IMF research director Kenneth Rogoff at a news conference in Washington yesterday, referring to Europe.

“And in terms of budget policy, really long-term budget policy dealing with the pension problems, that's what is really needed to achieve medium-term sustainability.”

He said that the IMF does not believe that monetary policy on its own would be able to “pull Europe out of its doldrums”.

And he said that the industrialised world as a whole needs to face the issue of demographic ageing by raising the age of retirement.

“Raising the age of retirement has to be one piece of any solution, and implementing such a policy is as important as any measure most industrialized countries could take towards achieving medium term fiscal sustainability.”

“All the major industrialized countries face serious ageing problems over the coming years, with pension and health care sustainability problems arising in the very near term in Japan and in many countries across Europe,” Rogoff told journalists.

“Given current low birth rates, it is just not possible for people to go on indefinitely living longer and retiring earlier, happy as that thought may be.”

He said that for many industrialized countries, age-related government expenditure is expected to rise by 5%-10% of gross domestic product by 2040.

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