European forecasts for spending on pensions: by 2060, this spending should drop off substantially as a proportion of French GDP
Since 2001, the European Commission has commissioned regular harmonised forecasts for public expenditure connected with ageing. As such, the Directorate General of the Treasury and INSEE have produced forecasts for French spending on pensions. The macroeconomic and demographic projections used for this exercise are those established by the Ageing Working Group (AWG) and Eurostat. Thanks to the reforms adopted over the past twenty-plus years, spending on pensions should decrease noticeably as a proportion of gross domestic product (GDP) between 2013 and 2060 (-2.6 points). France should thus find herself in a relatively favourable position in relation to her European partners, when it comes to dealing with an ageing population. Meanwhile, the Conseil d'Orientation des Retraites (Pension Stategy Council) produces annual national forecasts for France, which serve as a reference point in domestic discussions of this subject. According to the forecast published in December 2014, spending on pensions should indeed decline as a proportion of GDP, but to a more modest degree (-1.3 points). Two factors connected with the demographic and macroeconomic hypotheses used in the calculations can explain why the decrease is more pronounced in the AWG model. On the one hand, the AWG's demographic projections are more favourable in terms of the sustainability of public finances. On the other hand, the predicted productivity gains are more modest between 2020 and the mid-2030s, with higher unemployment from 2020 onwards. People would thus accumulate fewer pension credits, driving down the total value of spending on pensions over this forecasting period.