Saturday

31st Oct 2020

Ex-commissioner questions survival of euro

Frits Bolkestein, the former EU internal market commissioner, has questioned the chances of survival for the euro in the long term.

Mr Bolkestein, who served in the previous Prodi commission from 1999 to 2004, predicted in a speech delivered on Wednesday (25 January) that the common currency will face a huge test in around 10 years, when a pensions boom is likely to hit Europe.

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The ageing of Europe's population will hit the continent "ruthlessly," the outspoken Dutch politician stated, with eurozone states like Italy being unprepared for the expected jump in pension claims.

These states "will be forced by political pressure to borrow more and increase their budget deficit, with consequences for interest rates and inflation," he indicated, adding "the real test for the euro is not now, but in ten years time".

The ex-commissioner concluded "therefore, in my view the long-term chances of survival of the euro should be questioned."

In his speech, delivered before Dutch business leaders in London, Mr Bolkestein highlighted Italy as an example of member states' unpreparedness for demographic change.

The country finances pensions through contributions of the current working population, not through savings of pensioners themselves, managed by pension funds, the former commissioner pointed out.

This system will be put under pressure when the number of retired people increases compared to people with jobs.

Mr Bolkestein indicated that rising budget deficits as a consequence of the pension boom will be difficult to control, as the EU's stability and growth pact - the set of rules underpinning the euro - is not working.

Despite the pact, which stipulates that eurozone states' budget deficits may not exceed 3 percent, "member states, particularly the big ones, do what they want," according to Mr Bolkestein.

Mr Bolkestein, a free-market oriented liberal, is currently writing a book on the influence of intellectuals on politics in the 20th century.

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