De Guindos: “Demographic decline weighs on Eurozone, increase labor force participation”

Brussels – Either have more children or open doors and borders to immigrants, or the EU is headed for an economic collapse. The European Central Bank continues to look with concern at the population decline phenomenon, which is one of the challenges to the resilience of the EU and the euro area. It is a difficult challenge because it is structural, and ECB Vice President Luis De Guindos reminds States responsible for family and labor market policies. At the eighth Mediterranean Central Bank Conference,  the Eurotower’s number two stressed that labour and labor market participation have “in the past few years due to strong inward migration, increasing participation of women and the elderly in the labour market, and declining trend unemployment.” But that is about to change. “It is however expected to dampen, reflecting negative demographic developments as the euro area population is projected to decline owing to low fertility rates, assuming no further support from migration.”

Here, then, is the crux of an all-European problem. Fewer children and fewer immigrants. Either change in one direction or change in the other, otherwise the role and weight of the EU and its eurozone will remain on the sidelines in an increasingly competitive world where Europe is losing competitiveness, even now.  “The euro area’s competitiveness and productivity, which currently lag behind those of the United States and China,” the European Central Bank vice president warned. It is a problem, considering also the geopolitical race for sustainability and the clean-tech industry development that is at play with the United States on the one hand and with the People’s Republic of China on the other.

A change of course is needed: it will not be easy or immediate, but necessary.De Guindos offers a possible third option, in addition to reversing the demographic decline, and thus more births and more attention to immigration: the third option is “​structural reforms that promote labor force participation, support, and upgrade education, and improve the matching of skills between labor supply and labor demand can help to mitigate the impact of demographics,” he said. Such measures, however, remain a problem and tend to be increasingly so.