Ageing and the sustainability of public finance

This paper analyzes the impact of the demographic transition on welfare expenditures and the sustainability of public finances. A comparison among different projections reveals that welfare expenditure is expected to grow substantially in the coming decades, both in absolute and as a percentage of GDP. It is expected to return to values comparable to current levels only in the very long run, albeit with a much older population. Based on indicators of sustainability incorporating these projections, we argue that a remarkable consolidation effort would be required to reach a plausible debt target, especially under the latest projections. A less demanding yet still significant effort is required to ensure solvency in the long run.