An EU that ignores ageing is no longer fit for purpose

by Giles Merritt*

Is the European Union still fit for purpose, or is it floundering in the face of both urgent crises and long-term threats?

Two European summits this week have a bearing on the question. One is the inauguration in Strasbourg of the long-heralded Conference on the Future of Europe. The other is a less glitzy social affairs summit that’s routinely held every four years and is far more relevant to the EU’s future.

The one-year “citizen-based consultation” being launched in Strasbourg is doomed from the start. Aiming to define a reform strategy for the European Union, it is saddled with three co-chairs, representing the commission, parliament and council. This will inevitably mean deadlock on all but the most anodyne questions.

The disparities between member states are already daunting and getting wider

Potentially more significant is the social affairs summit in the Portuguese city of Porto, even though the stage there is set for an embarrassing intra-EU stand-off. At issue is whether governments should deal collectively or individually with the demographic crisis that will engulf social welfare in the coming years.

Eleven of the EU’s member governments have thrown down the gauntlet by challenging the commission’s idea of a ‘European Health Union’. Confidence in the Brussels executive has been damaged by its mishandling of the Covid-19 vaccines programme, and that has evidently been a factor in the triumph of domestic politics over a collective approach to the challenges of ageing.

But by signing up to a ‘non-paper’ that dissociates them from any increase in the commission’s social policy role they are shooting themselves in the foot. The disparities between member states are already daunting and getting wider. In 20 years’ time, the newer member states of eastern Europe and the Baltic republics will be hardest hit by shrinking workforces, unsatisfiable pension demands and mounting healthcare pressures. The stances of Bulgaria, Estonia, Latvia, Lithuania and Malta are thus hard to understand, while those of Ireland and Finland are merely puzzling.

The economic impact of demographic change threatens the EU’s cohesion

As for Austria, Denmark, Sweden and the Netherlands, they are the ‘Frugal Four’ who opposed last year’s breakthrough deal on the EU’s €750 billion post-covid recovery fund and now are reluctant to help fund poorer countries’ healthcare.

The doctrine of economic cohesion that overlay the EU’s ‘Big Bang’ enlargement seems a fading memory. When communism collapsed throughout the former Soviet bloc, western Europe’s richer nations soon understood that their own security required them to bring their eastern neighbours into the EU and to promote their return to prosperity through solidarity mechanisms.

That lesson is being forgotten, even though the economic impact of demographic change threatens the EU’s cohesion. A recent UN forecast sees the overall EU population shrinking almost a quarter by the end of this century from today’s 446 million to just 365 million, with only Belgium, Denmark, Luxembourg, Ireland and France holding steady through immigration and sustained birth rates. Most of Europe therefore faces massive disruption and economic hardship that can best be alleviated by coordinated policies on taxing and social spending.

Battered by the pandemic and populism, the EU’s credibility is at a low ebb

When the World Health Organization surveyed a few years ago what it termed the “demographic time-bomb”, it revealed that just two EU countries – Germany and the Netherlands – have dedicated insurance systems for long-term care of the elderly, and it doubted whether even these were sustainable. Since then the overall situation has been deteriorating fast; over a quarter of Europeans will be past retirement age by 2040, up from 18% now.

By mid-century, today’s average EU ratio of 3.5 workers per pensioner will have shrunk to 2.0. And despite many warnings by the commission and others of the enormity of demographic change, member states’ pledges to act together have proved worthless. A decade ago they committed to reducing the number of poverty-stricken by 20 million, and instead the total has risen. In Bulgaria, for instance, 35% of the adult population now risks outright poverty.

Battered by the pandemic and populism, the EU’s credibility is at a low ebb. To recover its mojo it must champion a far-sighted Europe-wide approach to overwhelming shifts threatening its member states. Only then will it be fit for purpose.

*Founder, "Friends of Europe"
**first published in: www.friendsofeurope.org