European nations have no choice but to raise retirement ages – A case study shows why

In early October 2025, with his political future hanging by a thread, France’s resigned-and-reappointed prime minister Sébastien Lecornu pledged to suspend unpopular pension reforms until 2027, when presidential elections will be held.

- JAVIER Díaz GIMÉNEZ PROFESOR DE ECONOMÍA, IESE BUSINESS SCHOOL (UNIVERSIDAD DE NAVARRA) JULIÁN Díaz SAAVEDRA ASSOCIATE PROFESSOR, UNIVERSIDAD DE GRANADA

Socialist MPs declared victory. The French business community groaned. The S&P downgraded France’s credit rating, citing budget concerns.

With France kicking inevitable reforms at least two years down the road, and many European countries facing pension crises of their own, it is worth considering how to design pension reforms that are sustainable, equitable and politically viable.

One striking feature of the debate over pension reform in Europe is how well understood and extensively documented its root problems are. Europe’s population is aging. The birth rate is declining. Life expectancy is growing ever longer. Fewer people are contributing to fund public systems that will have more people drawing money from them for longer periods of time. At the same time, technological disruption is reducing the share of labour income in gross domestic product.

Since most of Europe’s pay-as-you-go systems were designed when demographics were entirely different, they must be adjusted to reflect the current reality. We accept this in other areas like education, where we rezone school districts and trim new school construction to reflect smaller numbers of children in our neighbourhoods. But any talk of adjusting the retirement age is met with thousands of furious protesters filling the streets of Paris, Madrid or Brussels.

In France, it’s also important to put the reform in perspective: it proposed raising the retirement age by two years, to 64. Denmark adjusts its retirement age every five years in line with life expectancy, and approved raising it to 70 by 2040 from its current 67 earlier in the year.

Pension reforms keep failing because the politics overrules the economics. Demographic transitions are predictable, their costs are measurable, and the policy tools needed to address their consequences already exist. But reforms collapse when they collide with electoral incentives and public mistrust.