Population timebomb threatens to shrink workforce and explode euro

ECONOMIC GROWTH in Europe will grind to a halt because of a population timebomb that threatens to produce a dire shortage of workers, according to a report published today.

Europe's birth rate has dropped below the rate required to replace the population level, the Centre for Economics and Business Research (CEBR) said.

It said that the Continent's population would age dramatically as the total numbers started to decline in 2005.

To stabilise the workforce at current levels, the five largest countries in the European Union would have to import about 35 million workers by 2050, the CEBR warned.

As a shrinking workforce would have to support a growing number of retired people, it would add to the burden on the state pension systems and health services.

Richard Cragg, the author of the report Demographics and Economic Trends, said the demographic problem could create an economic crisis for the countries that have joined the euro. He said diverging populations would push different countries apart with states such as Ireland seeing falling tax rates and those in Germany and Italy rising sharply.

"The strains could break up the single currency and may even destabilise European government," he said.

Mr Cragg said the problems could be replicated in japan and, to a lesser extent, United States. However, emerging markets were still "a century away" from suffering a demographic crisis.

CEBR forecasts show that growth in potential output will slump from 2.3 per cent in 2000 to 0.5 per cent over the period between 2025 and 2050.