Correspondence: Joe Mencinger, Law School, University of Ljubljana, Poljanski nasip 2, 1000 Ljubljana, Slovenia. Tel: 386 1 25216881; Fax: 386 1 4256870; E-mail: joze.mencinger@pf.uni-lj.si

¹obtained his PhD from the University of Pennsylvania. He is a professor of economics with the Law School, University of Ljubljana. He served as Deputy Prime Minister, Republic of Slovenia from 1990 to 1991. He was a member of the board of governors, Bank of Slovenia from 1991 to 1997. He also served as the rector of the University of Ljubljana from 1998 to 2005.

Received 21 September 2008; Revised 21 September 2008.

Abstract

One of the rarely questioned 'truths' in the present cycle of conventional economic thinking is that ageing and pensioners are endangering the fiscal stability of EU countries. Yet, the data indicate that despite a considerable increase of the debatable old age dependency ratio, the shares of pensions in gross domestic product in EU countries stabilised due to the developments in their determinants: the retirement age, the replacement rate, the old age ratio and the development level. This indicates that the threats of 'greedy' pensioners to fiscal stability are highly exaggerated and that solutions for the ageing of the EU population can be found within the existing pay-as-you-go systems, provided there are jobs available. The demographic, 'Lisbon' and financial directions of the European Commission appear to be rather extraneous. Indeed, increased birth rates and migrations might produce more problems than solutions: job creation by the Lisbon strategy seems to consist of empty talks, while changing financing patterns and privatisation would only create redistribution without increasing the funding.