Western Europe’s demographic time bomb leaves its leaders with few choices
Joseph Chamie, who recently retired as the chief demographer for the United Nations, has a new piece out that lays out in stark terms the choices that not a few Western European countries may soon face. With plunging birth rates already well below replacement rate and a tired economic engine lacking any momentum, these countries are beginning to realize the awesome promises they have made to their retirees simply cannot be kept. Greece has already responded by increasing retirement ages and chopping benefits, but they’re still far away from an entitlement promise that’s likely to be kept.
What’s the solution? If these countries want to stave off tax increases (which will chase away labor and investment in the EU environment, where workers and capital are free to move), their options are few. Increasing birth rates is easier said than done, and even if a country such as Spain or Italy were to muster the will to buy an increase in birthrates (a la France) it’s not going to matter much for the next two or three decades, beyond the time when their budget exigencies will come to a head.
What’s left? More immigration. Witness the gradual thawing of the EU’s relationship with Turkey, despite the fact that Turkey’s been doing little to help its cause of joining the EU (unless imprisoning journalists is now a virtue in that part of the world.) Why the change? For starters, Turkey’s decade-plus of strong economic growth has moved it from being the weak sister of the continent to the one bright spot in an otherwise economically moribund part of the world. With Prime Minister Erdogan’s turn towards the east, Europe is beginning to realize that they may need Turkey and its 74 million citizens more than Turkey needs the legitimacy of EU membership.
At some point, a European prime minister is going to level with his or her citizens and tell them they have a choice: Higher taxes, later retirement ages, lower benefits or more immigrants — or some combination thereof. If he’s not immediately deposed after his bout of honesty, my money’s on the one option that doesn’t cost people money–the immigrants.
