Government debts will surge in coming decades if action isn’t taken quickly to cut the cost of paying pensions and providing health care to aging populations, Standard & Poor’s (S&P) Ratings Services says.
If governments don’t cut age-related spending the size of the state relative to the economy will jump and credit ratings will fall, with developed economies suffering the largest downgrades.
However, many European nations that have generous state pension systems and will have older populations would be in a much worse position.
The sharp rise in government debts as a result of the financial crisis and the recession that followed have made action more urgent, S&P says.
S&P said governments have a number of options. They can try to improve the employment rate for older workers, cut spending on other items, or cut spending on pensions and health care.
Source: Paul Hannon, S&P Warns on Cost of Aging Population, Wall Street Journal, October 7, 2010.
For text: http://online.wsj.com/article/SB40001424052748704696304575537893781930572.html
For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17
First published by the National Center for Policy Analysis, United States
FMF Policy Bulletin/ 19 October 2010
