Only 15 years
of surplus will save Euro pensions
Tomlinson, the Independent
governments need to maintain a budget surplus for more than 15 years to
fund state pensions for today's middle-aged, the International Monetary
Fund has warned.
ageing populations will need public spending of around 17 per cent of GDP
by 2050 to fund their pensions. Governments must run surpluses of about 2
per cent of GDP for the next 15-20 years to meet the requirements, the IMF
said last week.
offered the alternatives of making "substantial" cuts in state
pensions or replacing them with private sector schemes. However, the
latter could also blow a hole in government finances, the IMF said in its
report "Euro area policies: selected issues".
week the IMF, whose annual meeting opens in Dubai this weekend, criticised
France and Germany for failing to reform their public finances. The
countries are this year expected to breach the eurozone limit of 3 per
cent of GDP on budget deficits.
countries of continental Europe face the worst pension crisis. The IMF
said the problem was not as acute in the UK because it has a smaller state
Roger Bootle, managing director of the research firm Capital Economics,
said the UK's company pension schemes faced similar deficits. "We
have got this fantasy that we are alright because our [public] systems are
funded, and Europe is up the creek," he said. " But the problems
that affect them are the same as those affecting us. For them it manifests
in [budget] deficits, over here in the form of underfunded [company]