The slowly expanding sovereign-debt crisis and Europe’s halfhearted attempts to deal with it have dominated reporting about Europe for the past few years, but the Continent has a graver and even more intractable problem. Megan McArdle points out at The Atlantic that even if Europe manages to get its finances under control its demographics threaten to further cripple its economy:
Unfortunately, growth (or at least the sustainable variety) is typically a long time in the baking, and dependent on two main ingredients: more workers and higher worker productivity. And much of Europe is short on the former. That has big implications for Europe’s future. […]Italy’s fertility rate has actually been inching up from its 1995 low of 1.19 children for every woman, but it is still only about 1.4—well below the number needed to replenish its population (2.1). As a result, even with some immigration, Italy’s population growth has been very slow. It will soon stall, and eventually go into reverse. And then, one by one, the rest of Europe’s nations will follow. Not one country on the Continent has a fertility rate high enough to replace its current population. Heavy debt and a shrinking population are a very bad combination.
This nails it. Generous welfare programs, early retirement, low birthrates, and crippling debt are the most serious problems facing the developed world at the moment. As with the debt crisis, it doesn’t appear that Europe has developed any credible plan to deal with the most serious long-term issue it faces.Read the whole thing.