Pension costs a threat in Europe

TEXT OF STORY

Steve Chiotakis: Strikes this week in Spain and Greece have caused all kinds of economic pain. Protesters in both European countries are angry about government cutbacks, such as a hike in the retirement age. Both have been hit hard by the financial crisis. And reporter Brett Neely tells us that’s no coincidence.

Brett Neely: European countries like Spain and Greece are producing fewer children. Europeans are also living longer, but still retiring as early as 60. That combination is pushing European public pension systems to the edge of collapse. So these countries are starting to raise the retirement age.

Jacob Kirkegaard: They’re just doing, or being forced to quote unquote finally do what they should have done, you know, maybe a decade or two ago.

That’s Jacob Kirkegaard at the Peterson Institute for International Economics. He says otherwise, governments have to borrow more money.

But lenders are already wary because of the Greek debt crisis. And that crisis is already making rating agencies like S&P take a look at downgrading European debt.

Kirkegaard: In the case of the rating agencies, they put I think a lot of emphasis on the pension system.

Kirkegaard says Europe will be crippled if it doesn’t control its pensions. He adds that out-of-control pension costs are the same kind of threat to European economies as sky-rocketing health care costs are to the U.S.

In Washington, I’m Brett Neely for Marketplace.