Sustainability of pension and health care programs in the European Union

European Union governments are undertaking substantial pension and health care spending reforms to reduce public deficits and debt. The broader effects of these fiscal reforms have a great impact on retirees as the greatest consumers of health care and beneficiaries of pensions. As a result, changes in pension benefits and health care spending by governments in the European Union will have a significant impact on labor markets as spending and consumption by this key age demographic will contract. Thus, the challenge is to develop public policy that creates sustainable pension and health care plans without producing high unemployment, especially for females and youths, or increasing the poverty rates of pensioners. This paper, using OECD and Eurostat data, examines the health care sustainability gap, the net pension wealth requirements to remain out of poverty, and explores key statistical indicators such as the aggregate replacement ratio, youth unemployment, and pension expenditures versus aging patterns to determine the sustainability of EU pension and health care programs. Analyses of various public policy options are also presented.