Economic View: Wanted, fertile Europeans

Donald Rumsfeld got it only half right. The distinction is not between old and new Europe; it is between old and even older Europe.

Europe's demographic woes are back in the news for several reasons. A week ago the IMF produced a paper suggesting that European governments, far from running deficits, ought to be producing surpluses of around 2 per cent of GDP for the next 15 years to fund public pensions. Italy, which has the most serious problem, has just unwrapped a plan to reform its pension system and increase the retirement age to 65. Germany's government is trying to win support for its plans to increase the retirement age to 67 and cut benefits by 10 per cent in real terms. And David Willetts, shadow minister for pensions, has just produced a paper ("Old Europe? Demographic Change and Pension Reform") arguing that we have a problem even here in Britain. And he ponders whether we should start to think of ways of encouraging larger families.

This thought - that the core of Europe's problem is our reluctance to have more children rather than the pressures on our pensions - will I think come to dominate the debate. The pension problem does have solutions, albeit painful ones: higher taxation, lower public pensions and later retirement. As a result, growth in living standards throughout Europe is going to be much slower in the future than it has been in the past.

But, at a cost, the pension deficit can be filled. The baby problem is harder. Families have become smaller throughout the developed world, and that trend is now spreading to most of the developing world too. Within Europe, the collapse in family size has gone furthest in Spain and Italy - where women are projected to have on average the equivalent of only 1.2 babies - and in eastern Europe. Here in the UK the projections are slightly higher, for around 1.6 babies (see first graph). In Europe, only France and Sweden have total fertility rates that approach the replacement rate of 2.1 babies.

In his paper, Mr Willetts shows how Europe's population is likely to plunge, falling below the US in about 25 years' time and cutting Europe's share of world output to some 10 per cent by 2050. (Some UN projections are shown in the other graph.) The fall in the number of people of working age is so dramatic that even if retirements are pushed back, the size of the workforce may still decline.

We can increase immigration. But it would be difficult to absorb the necessary numbers to make a difference, and to attract immigrants with sufficient skills.

And we can choose to have larger families. So what's stopping us? The collapse in fertility is a huge puzzle. Is the decline the result of more women working? To some extent this may be true, but the fall in fertility has been most dramatic in eastern and southern Europe, where male/female roles are most traditional.

Why is France different from Britain? Five years ago we had the same fertility rates; they have gone up, while we have come down. High property prices? Starter homes are a sight cheaper in Italy or Spain than they are in Paris or indeed London.

And, surely the greatest puzzle of all, why are Europeans different from Americans? The bigger country/greater space argument does not wash. In the 1970s, US fertility rates were actually a little lower than British ones. But they have gradually risen from a low point in 1975, while our fertility rates moved sideways until about five years ago, when they started to fall.

Until we understand why this is happening, it is hard to suggest solutions. There is, perhaps, a general point to be made that low birth rates do suggest some sort of lack of confidence in the future. Economic or political disruption can be catastrophic. In eastern Europe, rates fell after the end of communism. By contrast, the recovery in the US may have something to do with the general rise in self-confidence after the end of the Vietnam war.

None of this explains Italy or Spain. I was at a conference near Siena over the weekend at which this was one of the subjects discussed. But the Italians there did not really have any very good explanations. They spoke about the cost of housing in the prosperous north, the fact that men did not leave home on average until about 30, the desire for material objects and so on. But Italy is a prosperous country by any standards and until about 10 years ago experienced very rapid growth. Given this puzzle, can anything - should anything - be done?

Of course, no one would suggest that people should bring more children into the world if they were not wanted. Nor is there any evidence that only children are disadvantaged - if anything, the reverse is true. On the other hand, there is a little evidence that people have fewer children than they would ideally like and this may have something to do with money. In France and Sweden, it seems that tax breaks for larger families do have an influence.

If people really are having smaller families than they would ideally like, there are other things governments can do. They could take basic responsibilities such as schooling and policing more seriously. Frank Field, the Labour MP, has some thoughtful practical suggestions on the need to build a more civic, and more civil, society. Tipping the rights/responsibility balance towards rights might help people feel more secure about their future.

Finally, I think we also have to ask some tough questions about the whole European social welfare model. If it really is superior to the US one in guaranteeing family security, why does Europe have birth rates that are so much lower?

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power