In a recent report by the Economic Policy Committee, it has been projected that if the implications of ageing are not addressed by structural changes, public expenditure could increase by up to 10% of GDP in the euro area by 2050.
This will occur directly through the impact on public pension and healthcare expenditure as well as via the growth-dampening effects of a gradually shrinking share of the labour force in the population. Hence, governments need to take pre-emptive action today before expenditure pressures start to increase rapidly after 2010.