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Demographic change will hit public debt sustainability in European Union countries

Author

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  • Darvas, Zsolt
  • Welslau, Lennard
  • Zettelmeyer, Jeromin

Abstract

By consecutively applying the EU’s debt sustainability analysis through 2052, we find that EU countries must improve their primary balances during the initial four-to-seven-year adjustment period starting in 2025 and then maintain these balances at broadly stable levels. However, in most countries, fiscal adjustments in the non-ageing portion of the budget must continue and reach historically high levels. Risk factors may necessitate even greater adjustments, while policies could partially alleviate fiscal pressures. The implementation of EU country-specific recommendations related to labour markets, pension systems, and productivity has been limited, and these recommendations do not adequately address immigration and fertility-enhancing policies.

Suggested Citation

  • Darvas, Zsolt & Welslau, Lennard & Zettelmeyer, Jeromin, 2025. "Demographic change will hit public debt sustainability in European Union countries," Journal of Policy Modeling, Elsevier, vol. 47(6), pages 1131-1157.
    • Handle: RePEc:eee:jpolmo:v:47:y:2025:i:6:p:1131-1157
    DOI: 10.1016/j.jpolmod.2025.09.004
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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