Europe faces new trials with Trump's pressures and ageing crisis
Donald Trump's return to the White House and his pressure to increase defence spending present Europe with new challenges. Coupled with ageing populations and declining productivity, European welfare states must contend with growing financial pressures, according to CNN.
As CNN reported, Donald Trump's return to the White House intensifies Europe's concerns about the pressure on welfare states and rising defence costs. The United States, a key trading partner for Europe, may impose higher import tariffs.
According to analysts from Goldman Sachs and J.P. Morgan, this could hinder investment and economic growth in the region. Trump is also intensifying demands on NATO allies, calling for defence spending to be doubled to 5% of GDP.
CNN highlights that even a slight increase in defence spending could significantly impact already strained public finances, which must address other growing demands.
Europe under demographic and financial pressure
Rising defence costs are not Europe's only challenge. The continent is also coping with a demographic "tsunami"—ageing populations that generate an increasing financial burden.
In Germany, Europe's largest economy, maintaining current pension benefits requires GDP growth of at least 2% annually, which seems unrealistic in light of recent economic downturns, argues Deutsche Bank's CEO, Christian Sewing.
According to estimates by American consultancy McKinsey, the anticipated decline in the number of working-age people relative to the total population in Western Europe could lead to a significant reduction in GDP growth per person—on average by £8,000 annually over the next 25 years, according to McKinsey.
The decreasing proportion of the working-age population and the deceleration in productivity growth further exacerbate the situation. McKinsey estimates that by 2050, this decline could reduce annual GDP growth per person in Western Europe by £8,000.
