The hidden debate in the euro zone: the impact of the demographic downturn

Demography: a parameter-base of production and demand. Its trajectory prints its mark over a long period. Regime changes in this area have a heavy economic impact, often destabilizing, and Europe is in one of these moments in its history.

Slight decline in 2040-2050
The euro zone, taken as a whole, is first and foremost a space that has entered since 2008 a zone of deceleration of its population, which will assert itself in the next two decades to turn into a slight decline by 2040-2050. Behind this, there are, as we know, fundamentals of fertility, which do not ensure renewal, in other words a natural growth, excluding immigration. This means that the dynamism of the big market is sealed at the base. And that companies in the area will always be more inclined to look for their outlets outside the European area.

Powerful effects on consumption
It is then an area whose age structure is changing profoundly, as expected. But now we are in the hard of this recomposition. With an accelerated rise of age classes to be retired. A base of young people in a relatively stable phase of education. And with during a strong retraction on the part of the population of working age. This recomposition first has a powerful effect on the structure consumption:

a growing assertion of needs related to health and dependency, or services related to the person. Production systems anchored on the territory and relatively non-exportable;
a permanent need for education;
an attrition of equipment needs or construction specific to the population of working age.

These are trends, already committed, but which will assert themselves more and structure the offer. With a strong interest of the sectors of the building for example to invest the fields of the renovation, in particular energetic.

Other common problems in the euro zone country: a downward trend in the labor-age labor pool that will negatively impact GDP and intensify the issue of labor market shortages. And of course, with the collateral effect, an exacerbation of the issue of financing dependency, which can be seen through the ratio of 15-64 or 20-64 to the senior population, which will reach its peak around 2040- 2050, but whose representation in variation shows that the acceleration of history is now (between 2018 and 2030 in particular).

Heterogeneity of situations
But beyond this common history, the euro area is faced with the question of the heterogeneity of situations, which may highlight once again its inability to coordinate. This heterogeneity is already perceptible in the fertility rate, a decisive variable in the natural increase of populations. With the fundamentally deteriorated fundamentals of Southern Europe, those of the CEECs too, in and outside the area … Germany in the middle position, and France in the prow of Europe.

Without looking at all the demographic magnitudes, this heterogeneity is evident when one examines the foreseeable variation of the population of working age in the 10 years to come. It is in the CEECs that the decline will be the most pronounced … In other words, the attrition of the German labor pool is aggravated by that of its hinterland, privileged place of its subcontracting. The problem is also particularly acute in Greece or Portugal. For the Rhine basin, the question of skills shortages will become decisive. For the second, there is a worrying aggravating factor of the pension equation. And it is clear that this element will play a decisive role in tackling the migratory issue. On this point, the interests diverge.

If we pay attention now to the ratio between people in employment (potential contributors therefore) and the senior population over 65 (potential retirees), which largely determines the solvency of the pension systems, first budget item, again the heterogeneity, as the rates of degradation vary greatly from one country to another, not creating the same budgetary stress. This indicator highlights the intensity of the problem in the south. The countries of the North and Germany have eased the constraint by raising their employment rate. The increase of employability is thus crucial to avoid the social impoverishment of the South … But it is a goal practically unattainable in a Europe without growth. Even more unattainable if the Rhine basin siphers off the Southern powers.

This is only a very piecemeal point of view of the stakes, but sufficient to realize that Europe is now absorbing a shock of the first order. An asymmetrical shock, moreover, uneven depending on the country and which requires more than others a common strategy. Surprisingly, this question is totally absent from a European debate, which prefers to take advantage – in an opportunistic fashion – of the anxiety dimension of the migration issue.

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