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European states must raise retirement age: EU

05 July 2010, 17:57 CET
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(BRUSSELS) - European governments must raise the retirement age in order to prevent the collapse of their pension systems, the European Commission said, but such reforms have drawn the ire of workers.

Weak growth, ballooning national debt and higher unemployment "have made it harder" to make good on pension promises and "more urgent" to reform them, the commission says in a document to be presented Wednesday.

The document bluntly warns that demographics are working against Europeans since birth rates are weak while people are living longer and this puts massive strains on a system where retirees get their pensions paid by workers.

"On present trends, the situation is untenable," says the 'Green Paper' on pension systems obtained by AFP.

"Unless people, as they live longer, also stay longer in employment, either pension adequacy is likely to suffer or an unsustainable rise in pension expenditure may occur," it says.

In the last 50 years, life expectancy in the European Union has risen by about five years and could increase by another seven years by 2060, the commission says.

At the moment, there are four working-age people for every person over 65 in the 27-nation EU. That ratio will worsen to two for every person over 65 by 2060, the commission says.

On average, Europeans retired at the age of 61.4 in 2008.

This compares to 65 years for workers in the United States and 70 years in Japan. In the 31-nation Organisation for Economic Cooperation and Development, the average retirement age for men is 63.5.

The commission recommends that European governments raise the retirement age, although it notes that such a move is the perogative of national governments.

The recommendations feed into a debate raging in Europe over how to reform a pension system that many believe is untenable.

"Ensuring that the time spent in retirement does not continue to increase compared to time spent working would support adequacy and sustainability," the commission document says.

"This means increasing the age at which one stops working and draws a pension.

"Prolonging working lives to reflect continuous gains in life expectancy over time would bring a double dividend -- higher living standards and more sustainable pensions."

Several European countries have launched pension reforms to reduce their public deficits.

The socialist government in Greece, which is at the epicentre of a debt crisis that has rocked Europe, wants to raise the retirement age to 65 as part of a draconian austerity drive to slash its massive deficit.

The Spanish and German governments are eyeing 67 as the new retirement age, up from from 65 today.

A poll showed that half of Greeks oppose the pension reforms, which parliament was expected to approve this week.

In France, plans to raise the retirement age from 60 to 62 by 2018 sparked a mass strike that brought hundreds of thousands of people to the streets across the country last month.

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