Ageing Europe warned of 'unsustainable' pensions

Europe's low birth rates and ageing population make it imperative for EU member states to overhaul their pension systems, the European Commission says.

A Commission report advocates automatic adjustments to the retirement age as life expectancy increases. Some EU states have adopted such a mechanism.

"The current situation is simply not sustainable," said EU Employment Commissioner Laszlo Andor.

France, Greece, Spain and the UK have plans to raise the retirement age.

But the changes, brought in as governments seek to slash chronic budget deficits, have angered many workers. Thousands have protested in the streets.

There are currently four people of working age for each person over 65 in the EU, but by 2060 the ratio will be just two for each pensioner unless pension systems are overhauled, the Commission says.

The Commission - responsible for drafting EU laws - accepts that the governments of the 27 EU member states retain control over national pension systems.

But the EU "green paper" on pensions is aimed at launching a debate involving all stakeholders so that European pension systems are harmonised better. It is inviting contributions to the debate until 15 November.

"The choice we face is poorer pensioners, higher pension contributions or more people working more and longer," Mr Andor said.

The report says "the steep rise in old-age dependency ratios could be largely avoided if people would work longer".

Less than 50% of adult Europeans are still in work by the age of 60, yet member states had pledged in 2002 to push back the retirement age by five years, it says.

The Commission also complains that there are "considerable barriers to cross-border activity" in the area of pensions. Discriminatory tax rules are among the obstacles that many pensioners face when they move to another EU country, it says.