European Union countries could face a massive budgetary and welfare crisis within 50 years unless they tackle the problems of an ageing population, the continent's banks warned today.
The European Banking Federation said in a study that people's working lives needed to be extended and pension systems to be reformed if the EU is not to fall further behind the US in terms of growth and competitiveness.
Politicians should also face up to the need for more immigration, the chairman of its economic and monetary affairs committee, Mr Martin Huefner, told a news conference.
The banking federation report said the US population would keep growing steadily until 2050 while the EU population would start to decline after 2020.
This meant that by 2050, there would be two people of working age for each person aged over 65 in the EU, compared with a ratio of four to one at the moment.
The federation urged EU politicians to reform pension systems to encourage private pension provisions and extend working life.
It also stressed the need to look again at immigration policies but admitted this was a thorny political issue. "It is very difficult and it needs a high political skill but we need more immigration," Mr Huefner said.
He said growth could suffer in the short term if EU citizens started to save more to provide for old age as this risked crimping consumer spending.
However, policymakers could compensate by doing more to stimulate growth, he added.
The study said international financial markets would punish EU countries which did not show they were preparing for demographic shifts.
The euro, government credit ratings, and investment flows into the 25-member EU could all suffer, it said.