By 2070, ageing costs in Luxembourg are expected to be among the highest in the EU, according the European Commission’s 2018 Ageing Report. If not addressed by decisive policy action, this could result in adverse implications for public debt and potential growth.
The report provides long-term projections of total public age-related costs and their components, which comprise pensions, healthcare, long-term care, education expenditure and unemployment benefits, for all EU countries over the period 2016‑70. The 2018 edition states that, “…total public ageing costs in the euro area are projected to increase by 1.1 percentage points of GDP over the projection horizon (2016-70), rising from 26% of GDP in 2016 to 28.2% of GDP in 2040, before declining again to 27.1% of GDP in 2070.”
It goes on to say that, “By 2070, ageing costs are projected to be highest in Belgium, Luxembourg, Austria and Finland, reaching levels above 30% of GDP, compared to around 15% of GDP in Latvia and Lithuania…The most notable increases are projected for Luxembourg, followed by Malta, Slovenia and Belgium, while the most significant declines are projected for Greece and France.”
Chart from European Commission
Public pension costs, followed by healthcare are cited as the most important drivers of ageing cots in Luxembourg and, according to a recent article published on the Luxembourg Bankers’ Association website, Luxembourg’s national council for public finances (CNPF) says, “Luxembourg’s public finances long term sustainability is facing a high risk. Hence, the CNPF recommends the competent authorities to take appropriate measures.”