EFTERLØN (3)

Last year's deal on the unaffordable efterløn regime, which raised the state pension age and changed the years in which efterløn was available from 60-65 to 64-67, put the system onto a more secure financial footing. The new coalition Government then came up with the idea of kick-starting the economy by giving the electorate a tricky choice; stay in the efterløn regime and continue to pay contributions, or opt out of the regime and get your contributions (+ interest) paid out tax-free. Money which consumers would then spend.

The window for making this choice ran out at the end of September, and the results are now in. 490,700 people took up the offer, with the Government paying out some kr.22.4 billion. This represented roughly 45% of all contributors, but what was really revealing was their distribution. Only 16% of those in the 50-59 year age group (i.e. those close to benefitting from efterløn) took the money, whereas 67% of those under 40 did so. The clear message is that young people simply don't believe that efterløn will be around in the same form when they get to the age where they could take advantage of it. If I were their age, I would probably do the same.

Unfortunately for the Government, getting cash into the hand of consumers does not necessarily mean that they will spend it. Most of it seems to have been put straight back into the bank or used to pay down debt. The Government finances may have improved in the long-term, but the short-term economic outlook remains weak.

I am off to Basel tomorrow to visit my handball-playing son, back blogging on Thursday.

Walter Blotscher