Post-covid pension reforms in Europe should focus on sustainability – leading macroeconomic influencers
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Post-covid pension reforms in Europe should focus on sustainability – leading macroeconomic influencers

04 Oct 2021

The reforms introduced in European pension systems have placed unnecessary burden on younger population.

Post-covid pension reforms in Europe should focus on sustainability – leading macroeconomic influencers
Credit: fizkes/Shutterstock.com.

Experts opine that post-Covid reforms should focus on sustainability and equity.

Linda Yueh

Linda Yueh, economist at the University of Oxford, shared an article on the equity of pension systems in Europe in the post-Covid era. The ageing population in Europe resulted in the implementation of several reforms to ensure the sustainability of the pension system. Major reforms, however, were implemented following the 2007-2008 global financial crisis and the European debt crisis. The reforms improved the structure of the pension systems and provided enhanced protection to low-income retirees.

However, some of these reforms lost steam as the effects of the global financial crisis and the European debt crisis waned. Furthermore, the Covid-19 pandemic exacerbated the sustainability risks of the pension systems and disproportionately affected the younger and working age populations compared to retirees. The article highlighted the need to rethink the existing design of the pension and welfare system to ensure sustainability and equity of pensions.

Reforms in the future should focus on attaining sustainability of the pension system without burdening the younger generations. The reforms should be framed in such a manner that they strengthen the link between contributions and benefits. Furthermore, targeted pensions should be carefully designed in case of earnings-related pensions.

Andrew Leigh

Andrew Leigh, Labor MP in the Australian Parliament, shared an article on how the US became the most affected due to the Covid-19 pandemic despite being ranked as number one in pandemic preparedness in 2019. The Global Health Security Index released in October 2019 ranked the 195 countries based on pandemic preparedness following a multi-year review by experts. The index ranked the US at the top followed by the UK. Post-Covid, it became evident that the GHS was incorrect.

The article noted that the GHS index gave undue weightage to the wealth of the countries rather than experience in handling infectious diseases. The report analysed pandemic response plans based on whether a country had conducted simulation exercises, hence the data was old. Another difference that the report did not consider the ability to impose travel and trade restrictions.

The GHS index was unable to rank the countries accurately in terms of pandemic preparedness despite having a wealth of data. One of the reasons the report failed was due to the lack of dependent variable that could be used to provide weightage to the hundreds of other measures. The article noted that the report used data prior to the pandemic and should now use all the data post-pandemic to reassess pandemic preparedness in a more effective way.

Oliver Rakau

Oliver Rakau, chief German economist at Oxford Economics, shared an article that examined the trust in the European Central Bank (ECB) during the pandemic. The article used survey data to understand the expectations of customers from the ECB amid the pandemic. It stated that trust in central banks such as the ECB is essential to maintain price stability and therefore it is important to identify the factors that drive trust.

The article details the various ways in which trust can be improved in the ECB. Financial education is key to improving trust in central banks. ECB and other central banks can impart financial education by sponsoring education programmes that explain monetary policies to the general public. Central banks should also improve communication of monetary policies and enhance the availability and accessibility of information, the article highlighted.

Bank communication should also be tailored in such a way that the content is targeted at individuals with lower levels of trust. In addition, government policies and other policies that help improve the financial situation of consumers from the negative effect of Covid-19 will also help in improving trust in ECB.