The Impact of Ageing Populations on European Politics and Economies: A Call for Action

Europe Faces Demographic Dilemma: The Greying of Politics Threatens Economic Stability

Europe is at a demographic crossroads, with a new report from the European Bank for Reconstruction and Development (EBRD) highlighting the urgent need for political action to address the challenges posed by an ageing population. As both leaders and voters grow older, the report warns that the “greying of politics” is constraining the political willpower necessary to implement crucial reforms.

The EBRD’s findings focus particularly on emerging economies within Europe, where a declining working-age population could lead to a significant drop in annual GDP per capita growth—by nearly 0.4 percentage points between 2024 and 2050. This demographic shift, driven by falling fertility rates and increasing life expectancy, is placing immense fiscal pressure on governments.

“The big message from the report is that the time to act is now, before demographic trends close off the options,” said Beata Javorcik, the EBRD’s chief economist, in an interview with Euronews. “Politicians must be brave, they must be willing to communicate difficult trade-offs, and they must be able to resist short-term pressures.”

AI Isn’t a ‘Magic Solution’

To mitigate the economic impact of an ageing population, the EBRD suggests a multifaceted approach that includes fertility policies, increased migration, enhanced labour force participation, and the adoption of new technologies. However, the report cautions that while fertility policies aimed at encouraging higher birth rates have gained traction—rising from just 5% of economies in 1980 to the majority by 2019—the long-term impact remains limited.

“While some generous benefit packages have produced short-lived upticks in births, sustaining higher fertility has proved difficult once incentives have ended,” the report states.

Moreover, the potential of artificial intelligence (AI) to boost productivity is acknowledged, but researchers emphasize that it is not a panacea. “Advances in AI technology are likely to raise workers’ productivity in some occupations, but displace workers in others,” they noted, highlighting the uneven benefits across different sectors.

When Politics Trumps Economics

The report identifies increasing workforce participation—especially among older citizens—as the most effective strategy for managing population ageing. However, extending working lives is a politically sensitive issue. Statutory retirement ages have been rising across EBRD countries, yet the average effective retirement age remains lower, indicating that simply raising official thresholds may not encourage longer working lives.

“Extending working lives is a politically thorny issue, and many lawmakers—ageing themselves—are unwilling to broach the subject,” Javorcik explained. As older leaders tend to prioritize the needs of their own generation, younger voters—who are significantly less likely to participate in elections—risk being overlooked. An OECD survey revealed that citizens aged 18-29 are 21 percentage points less likely to vote than those aged 50 and over.

The Case for Migration

The report also highlights how the overrepresentation of older generations in politics often leads to more restrictive migration policies. While immigrants can strain welfare systems, they also play a crucial role in bolstering the labour market, particularly if they are young and skilled. In EBRD economies, emigration rates have consistently outpaced the global average, with only 6.4% of residents being foreign-born compared to 20% in advanced economies.

Younger citizens tend to favor more lenient migration policies, but their lack of political representation means their voices may be drowned out. “Rebalancing this dynamic will require not only daring reforms but also efforts to mobilize younger voters,” the EBRD concluded.

As Europe grapples with the implications of an ageing population, the call for bold political action has never been more urgent. The future economic stability of the continent may depend on the willingness of its leaders to confront these challenges head-on.