Euro zone: Ageing population, low potential growth, even lower per capita growth, difficulty reducing public deficits

The euro zone will now experience population ageing, with the decline in the working-age population outstripping the decline in the total population. If productivity gains fail to pick up, the result will be low potential growth, very low per capita growth and a fiscal deficit that will be impossible to reduce. The only way to avoid this growing fiscal deficit, if productivity gains do not pick up, is to reduce public spending, including pension and healthcare spending, in parallel with the reduction in potential GDP, or to implement a considerable increase in the tax burden.