Article at a glance:

The economic impact of an aging Europe

By 2025, one in five Europeans will be more than 65 years old, up from 16 percent in 2002. With more retired citizens, who tend to consume their savings, and fewer working-age citizens, who create most of those savings, the absolute level of savings will plunge across most of Europe. In the United Kingdom, Germany, and Italy—three of Europe's largest economies—household financial wealth will be $4 trillion less than it would have been if historical growth rates had persisted. That is a threat to the continent's living standards and economic well-being.

The take-away

If left unchecked, the coming slowdown in Europe's savings and financial wealth could depress investment, economic growth, and living standards. But a concerted effort to increase the returns on financial assets by increasing productivity throughout the economy and to boost savings rates can avert this outcome.