Ireland needs pension reforms, says EU

IRELAND needs further reforms in healthcare and pensions if the economy is to survive the impact of an aging population in the long run, the European Commission has warned.

Ireland was one of 11 countries whose stability programmes were evaluated by the commission yesterday. It said Spain and Ireland were good examples of fiscal policies complying with the Stability and Growth pact designed to maintain a healthy euro.

In the short term Ireland's economic outlook is excellent, but an ageing population poses real problems long-term. This is being partly offset by money being put into the National Pensions Reserve Fund together with a low debt level.

But Economic and Monetary Affairs Commissioner Joaquin Almunia said it was important for the Government to take additional measures to ease a very significant increase in age-related spending.

"We are thinking broadly of reform in health care and in the pension system. It is up to the Irish authorities to decide how to do this in the long run.

"In the short term the Irish situation is excellent with good debt levels and the reduction achieved here is impressive but there are some problems on the horizon because of the ageing population," said Mr Almunia."

Ireland's growth rate is expected to be between 4.5%-5% over the programme period of 2004-2007 which is slightly less favourable than expected in the previous update of last year. But the report warns of risks in the medium term.

In particular these are linked to global economic prospects given the openness of Ireland's economy, and domestically to a sharp downturn from the residential construction boom.

The report said projections for inflation to decline to below 2% by 2007 appear to be on the low side.

It notes that the average general government investment ratio of 0.5% percentage points of GDP a year from 2005 to 2008 is well above the EU average.