The Deputy Minister of Labor and Social Security talked about demographic forecasts, which show that we are heading towards societies that are smaller in number, but also older. Panos Tsakloglou spoke at a European Commission conference on the challenges and opportunities of increased longevity in Europe.
Mr. Tsakloglou noted that these demographic processes have been going on for decades in EU member states.
As he said, “to deal with their fiscal and macroeconomic consequences, European countries have taken and continue to take a series of measures, with the aim of both preventing the increase in pension spending as a percent of GDP and limit the exposure of the social security system to demographic risk.
More specifically, the category of policies adopted by European countries to prevent the increase in pension spending in GDP includes measures such as the elimination of incentives for early retirement, the adoption of measures to increase the labor force participation, the adjustment of pension replacement rates and the increase of retirement limits and/or their connection to life expectancy, bearing in mind that in the long term, in addition to life expectancy, healthy life expectancy also increases.
At the same time, steps are being taken to strengthen or create capital pension systems, complementary to existing distribution systems, since capital systems are not subject to “demographic danger”.
In addition, given that, based on available historical data, capitalized systems have higher returns than distribution systems in older societies, this measure also improves the adequacy of pensions for future retirees.
In closing, the Deputy Minister of Labor emphasized that longevity is a blessing.
“However, this creates challenges when combined with low birth rates and a shrinking population. The challenges that an aging population brings to the operation of health and long-term care systems will inevitably lead to to increase state spending on the welfare of our senior citizens.
In this context, the distribution of social costs must be done in a fair way, so that the welfare state can fulfill its purpose comprehensively for the present and future generations” said Mr. Tsakloglou.