The aging of Europe is not a problem, according to Dominic Standish.

On present trends of rising productivity, employing the same number of people in 2040 as now would produce over double the amount of wealth we currently have to provide for the pensions and care of the over 60s.

However, others disagree. William G. Shipman wrote,

The payroll tax in France is 49.3 percent, Germany is 40.9 percent, Italy and Spain are 42.5 and 37.8 percent, respectively. And unlike the United States, in many cases, but not all, the tax applies to all earnings. Yet, these numbers actually understate the burden placed on European workers for in each country the payroll tax revenue is not enough to finance benefits. Additional taxes are levied to make up the difference.

For many Western European countries, the shortfall of prospective taxes to benefits, the result of demographics, is greater in present value terms than the total value of government bonds outstanding in each country. Government debt including unfunded pension liabilities in some cases is multiples of commonly measured sovereign debt.

The most definitive analysis of aging and demographics that I have found is in a report by Maureen M. Culhane. Some relevant excerpts:

The increases in the over-64 population in North America and most of Europe will be relatively benign until 2010…both Italy and Germany are forecasting that by 2050 the percentage of the population over age 80 will be greater than that under 20…By 2050 Japan, Italy, and Spain will have only 60% of the working age population they have today.

Culhane gave a less optimistic view of the effect of productivity gains.

Holding productivity for all countries constant at 1.5%, we calculate that the GDP of Japan, Spain, and Italy will increase only 30% by 2050 as a result of declines in the working age population.

For Discussion. Will Europe’s economic significance decline as a result of these demographic trends?