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Ageing costs, public debt sustainability and EU fiscal rules

Author

Listed:
  • Meryem Gökten

    (The Vienna Institute for International Economic Studies, wiiw)

  • Philipp Heimberger

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

This paper examines the role of ageing costs in the reformed EU fiscal rules. Governments must pre-emptively tighten fiscal policy to offset projected ageing cost increases, but required adjustments depend on underlying assumptions. Using alternative scenarios, we show that small changes in ageing cost assumptions can lead to marked differences in debt paths and consolidation needs. The framework ignores ageing-related uncertainty in these projections. Lower ageing costs may even raise long-run debt by reducing upfront tightening. Overall, our results highlight that fiscal adjustment requirements – and their economic effects – are highly sensitive to uncertain and arbitrary ageing-related assumptions.

Suggested Citation

  • Meryem Gökten & Philipp Heimberger, 2026. "Ageing costs, public debt sustainability and EU fiscal rules," wiiw Working Papers 276, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:276
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    File URL: https://wiiw.ac.at/ageing-costs-public-debt-sustainability-and-eu-fiscal-rules-dlp-7620.pdf
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    More about this item

    Keywords

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    JEL classification:

    • 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
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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