LUXEMBOURG, March 4 (Reuters) - Europe's decades-old economic model, which has relied heavily on an expanding workforce, is coming to an end, the chairman of euro zone finance ministers said on
Europe’s Growth Model Faces Challenges as Workforce Shrinks, Says Eurogroup Chair
Demographic Shifts and Economic Implications for Europe
End of the Expanding Workforce Era
LUXEMBOURG, March 4 (Reuters) - Europe's decades-old economic model, which has relied heavily on an expanding workforce, is coming to an end, the chairman of euro zone finance ministers said on Wednesday, pointing to the need to mobilise savings to finance investment and innovation.
Demographic Headwinds and Workforce Projections
Kyriakos Pierrakakis told a conference organised by the European Investment Bank that Europe's economy was facing strong demographic headwinds and by 2040 its workforce, currently around 200 million people, could be shrinking by close to two million people per year.
Impact on Growth and Productivity
"That matters because it changes the equation. Growth can no longer rely on expanding labour supply. It must come from higher productivity. And higher productivity comes from innovation, investment and efficient capital allocation," he said.
"The growth model that supported European prosperity for decades is reaching its limits," he said.
Mobilising Capital for Innovation and Resilience
Pierrakakis told the conference that the strategic task for the European Union was to mobilise capital more effectively to finance innovation and scale.
Integrating Capital Markets
"That is the only lever that can raise productivity, increase incomes, strengthen strategic autonomy and build resilience," he said.
The 27-nation bloc seeks to integrate its different capital markets into a single market where capital would flow more freely so that some 10-11 trillion euros ($12.8 trillion) of Europeans' savings in bank deposits could be used more productively to finance the growth of innovative companies.
Barriers and Geopolitical Urgency
The integration has been slow because of vested national interests and political differences, but geopolitical changes over the last 12 months have given the work a new sense of urgency.
Exchange Rate and Reporting Credits
($1 = 0.8596 euros)
(Reporting by Jan Strupczewski. Editing by Mark Potter)
