TheChek News Flow

While global population is ageing, continent presents extreme example

With its low birth rate and fast-ageing population, Europe is facing a demographic crisis, one that economists fear could hit growth and public finances. 

While the global population overall is getting older, Europe is an extreme example of this trend, particularly in the continent’s south and east, which have been hit by record-low fertility rates and emigration. An analysis of the main demographic trends highlights the challenge faced by policymakers. 

WORLD’S OLDEST CONTINENT

Europe has had higher longevity and lower fertility rates than the rest of the world over the past few decades. It is now the region with the world’s oldest population. The median age in Europe is 43, twelve years older than the rest of the world. 

The trend will become more pronounced from 2021 when Europe’s population is forecast by the UN to start shrinking.

The number of people of working age, those aged between 20 and 64 years old, peaked in Europe in 2010. By 2020, there were nearly 12m fewer in this group than a decade earlier, a 2.6 per cent fall. By 2035, there will be about 50m fewer people of working age in Europe than in 2010. 

Emerging economies such as China and South Korea are also ageing rapidly — their median age has risen to more than 40 this year, doubling that in 1970 — and Japan has the largest proportion of people aged 65 and over in the world.

AND IT COSTS A LOT TOO

There is serious concern about the impact of an ageing population on public finances and economic growth. 

Philipp Engler, an economist at the IMF, forecasts that gross domestic product per capita in advanced economies will shrink as a result. The reductions are expected to be “substantial in the EU economies”.

Martina Lizarazo López, demographics expert at Bertelsmann Stiftung, a Brussels-based think-tank, calculated that by 2050, demographic change would damp average per capita income in France, Spain, Italy and Germany by €4,759-€6,548 at 2010 prices. The European Commission forecasts that spending on healthcare for older people and pensions, which already accounts for 25 per cent of GDP in the EU, will rise 2.3 percentage points by 2040. 

By 2035, about one in four people is set to be aged 65 or over in Europe, up from one in 13 in 1950.

FEWER BIRTHS IN THE SOUTH . . .

In southern Europe, exceptionally low fertility rates make the demographic trends particularly challenging. Portugal, Greece, Italy and Spain are among the top-10 world economies with the lowest number of births per woman. 

Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.

https://www.ft.com/content/49e1e106-0231-11ea-b7bc-f3fa4e77dd47

Southern Europe as a whole has a fertility rate of 1.37 per cent, well below the 2 per cent needed to replace the population. 

Poor job prospects and low wage expectations, coupled with a lack of family-friendly policies and an inflexible labour market have led to couples having fewer children and having them later in life, said Nikolai Botev, formerly with the United Nations Population Fund (UNFPA).

“Women in southern Europe enjoy equality in terms of education and employment, but within the family traditional gender roles persist, with women expected to shoulder much of the household responsibilities,” he said.

“Southern European countries have a particular welfare regime, with policies directed towards the preservation of traditional family forms and the family as the provider of welfare.”

LEAVING THE EAST

In eastern Europe, emigration — of people often in their prime — is also a factor. About 3.4m more people left Romania than moved there in the past 20 years. The country is home to only 19m. Over the same period, negative net migration was registered in Estonia, Latvia, Lithuania, Croatia, Serbia and Bulgaria.

In regions with the most dramatic demographic trends, “sustaining growth and social support requires some combination of more people working and people working more effectively, neither of which are easy to achieve,” said Alasdair Scott, economist at the OECD. 

COULD THERE BE AN ECONOMIC UPSIDE?

More and more older people are joining the workforce. In Europe, employment rates for those aged 50 to 64 rose nearly 20 percentage points to 57 per cent in the two decades to 2018, according to data from the OECD.

The European Commission has calculated that the silver economy — spending by people aged 50 years old and above — will reach €6.4tn by 2025, up from €3.7tn in 2015, and be responsible for nearly 40 per cent of the jobs created. 

Most measures show that Europeans have not just longer but also healthier lives. People in the EU aged 65 and over can expect to live without disabilities for one and half more years in 2017 than they did in 2005, according to official data from Eurostat.

“In the end what we really care about is welfare, and a longer life is a big improvement in standard of living, it is very important for the welfare of people,” said Hervé Boulhol, an economist in the Pensions and Population Ageing team at the OECD. 

If the data sharing era cannot be avoided then it makes sense for banks to prefer working with a known entity

US banks have given the nod to Visa’s $5.3bn bet on open banking through Plaid, the San Francisco fintech that connects bank accounts to apps.

At first glance this looks foolhardy. Plaid is a data aggregator that shares customer information with online companies such as PayPal’s Venmo so that users can make payments and keep an eye on their spending without ever going to the bank. Retail banks should see this as a threat. The easier it is for customers to access financial services through third-party apps the less they interact with the bank that holds their current account. Banks lose their chance to up-sell services. One day customers might decide they do not need a bank account at all.

Visa, however, built its business on symbiosis rather than disruption. If the era of data sharing cannot be avoided then it makes sense for banks to prefer working with a known entity.

The deal could therefore help some of the problems Plaid has experienced as it has expanded to work with more than 11,000 financial institutions. In theory, banking data in the US belongs to the individual. But banks sometimes prevent access to outside companies, citing the need to ward off potential damaging breaches. A recent security update at PNC Bank prevented Plaid from accessing information. With Visa’s backing such concerns may ease.

For Visa this is an expensive deal. At $5.3bn Visa is paying twice Plaid’s last private valuation. Most of the acquisition will be purchased with a mixture of cash and debt. Another $400m will be in stock. It may not leave much of a dent in the $420bn company’s $14bn cash pile but the immediate benefits look fairly modest. Plaid makes most of its money from licence fees. Visa expects the deal to add up to 100 basis points to revenue growth in 2021, suggesting about $250m. This means Visa is paying 21 times Plaid’s expected sales.

Look to the horizon, however, and the deal is worth the price. Plaid’s data will give Visa insights into most of the major financial technology companies. That could direct the company’s future acquisitions and product sales. Visa has just bought a key piece of the infrastructure required for a digitised financial system.

DAX:

MDAX:

SDAX:

Asian stocks, U.S. and European futures traded mixed Tuesday after a three-day rally in the run-up to the U.S. and China signing a long-awaited trade deal. The yuan hit its strongest since July.

Stocks pared earlier gains as data showed China’s trade with the U.S. slumpedlast year, as the trade war hit relations between the two biggest economies. Shares outperformed in Sydney and Seoul, fluctuated in Tokyo and Shanghai and slipped in Hong Kong. A rally in technology shares Monday sent the S&P 500 and Nasdaq Composite Index to record highs.

US After Hours MMSI up on Starboard stake; ICHR and MX up on guidance but GME sharply lower; Visa to acquire Plaid

Nikkei +0.73% Hang Seng -0.27% CSI -0.17% Shanghai -0.13% Shenzen +0.07%

Eur$ 1.1144 CNH 6.8802 CNY 6.8790 JPY 110.11 GBP 1.2984

S&P +0.00% EuroStoxx +0.29% FTSE +13% Dax +0.27% SMI -0.35%

Macro :

- JPMorgan Analysis Says S&P 500 Isn’t in a Bubble Till 3,700

Keep an eye on :

- AGR AV : Agrana Third Quarter Revenue EU629.4 Mln, +4.6% Y/y

- ATL IM : Atlantia Appoints Bertazzo as CEO

- BIM FP : BioMerieux Submits Enhanced Biofire Panel for FDA Clearance

- BKW SW : BKW Sees 2019 Ebit Beating Previous Year

- BOSN SW : Bossard FY Sales Meet Estimates; 4Q Americas Sales Down 15.8%

- DLG GY : Dialog Semi Prelim Fourth Quarter Revenue Beats Highest Estimate

- DNO NO : DNO Net CWI Production Rises 29% to 104,800 Boepd in 2019

- OLE SM : Deoleo Says It Has Been Sued by Some Shareholders Over Accounts

- EVK GY : Evonik Offering by Holder Prices 25m Shares at EU25.30/Share

- EVK GY : Evonik CEO Confirms Outlook for Past Financial Year

- HLAG GY : Chile’s CSAV to Buy More Hapag Shares and Plans to Raise Capital

- HLE GY : Hella First Half Adjusted Ebit -13% y/y; FY Outlook Confirmed

- K2AB SS : K2A Knaust & Andersson Fastigheter to Offer Up to 1.04m Shrs, Offering Prices at SEK169/Shr

- LEK LN : Lekoil: Loan Was Entered With Individuals Purporting to Be QIA

- LISN SW : Lindt & Spruengli FY Sales Meet Estimates; Confirms Targets (1)

- ALMED FP : Medicrea Starts Preliminary Talks With U.S. Strategic Partners

- NOVN SW : Novartis, U.K. to Work on Cholestoral Treatment Clinical Trial

- PGHN SW : Partners Group Buys European Portfolio for Over EU550m

- RNO FP : Renault’s Senard Says Alliance ‘Not Dead’: L’Echo (Jan. 13)

- RNO FP : Renault Alliance Is Here to Stay, Nissan Says After Ghosn Escape

- SZU GY : Suedzucker Nine Month Operating Profit EU113 Mln, -2.6% Y/y

- TKWY NA : Takeaway Orders Rise 56% in 4Q, Just Eat Deal Nears Completion

- TEN IM : Sell U.S. Oil Service Giants and Buy Tenaris, Bernstein Says

- UBSG SW : UBS Hires JPMorgan Money Manager Goldberger for Growth Strategy

- UG FP : Opel Plans to Cut 4,100 Jobs, Handelsblatt Reports

- VLA FP : Valneva Says U.S. Defense Dept. Exercises Option on Ixiaro

- VELO DC : Veloxis Investors Brace for Asahi Kasei Offer Deadline: Borsen

- VIV FP : Vivendi Begins New Legal Action to Block Mediaset Merger Plan

- FHZN SW : Zurich Airport Dec. Passengers 2.33 Mln, +1.2% Y/y