ESM Seminar Long term challenges to fiscal sustainability

As the euro area grapples with the Covid19 aftermath and an ongoing war at the gates, one should not lose sight of longer-term challenges to fiscal sustainability. The main risks to long-term sustainability come from

  1. climate change
  2. ageing transition
  3. inequality
  4. trade block fragmentation

Climate change has emerged as a main challenge to the health of public finances, already having an effect on growth and public spending. The impact is likely to increase with the severity of the shocks, and mitigation and adaptation needs.

This is exacerbated by an aging population, and an inverted demographic pyramid, where people save more and work longer. Longer life expectations also lead to higher health costs, with social security becoming an almost unsustainable burden in countries with unfunded systems. Migration could help alleviate demographic pressures, but not until migrants become net contributors to the European social welfare states.

Inequality is already a challenge, likely to intensify. The gap between returns to capital and labour has opened up, and the ensuing higher savings contributed to push interest rates down. Purchasing power and aggregate demand could further suffer as the middle class thins out.


Trade fragmentation and re-shoring could boost growth in the short term, but also raise costs and constrain efficient business decisions with negative longer-term growth effects.


The ESM in cooperation with ADEMU is organizing a seminar to discuss the implications of these risks and their interactions to fiscal sustainability and identify policy measures and reforms to help alleviate their negative impact of growth and public finances.

Objectives of the seminar:

  • Exchange views on the main long-term risks and their interactions for growth and fiscal sustainability
  • Discuss policy implications and challenges for national governments and European institutions

Seminar Setup:

  • This will be a hybrid seminar, taking place at the ESM premises and online
  • Presenters: senior policy makers and academics