Europe’s baby bust

WHEN IT UNVEILED a plan last month offering parents new financial incentives to have more children, the French government was seeking to redress a looming and deeply worrisome demographic crisis -- one that affects not just France but all of Europe.

The French have one of Europe’s highest fertility rates -- about 1.9 children per woman -- compared with only 1.3 in Germany, Italy and Spain. But because a fertility rate of 2.07 is needed to keep France’s population at a steady level, even the more amorous French are poised to watch their countrymen dwindle in the years ahead.

In Germany, Italy and Spain, the problem will be even more severe. The decline of Europe’s population promises to starve its economy of badly needed workers and to bankrupt its pension systems. One recent study estimates that the aging of its populace could cut Europe’s economic growth rate by as much as 50% by 2040.

Economic growth within the European Union already lags that of the U.S. for two main reasons: Europeans work roughly 15% fewer hours per year than Americans, and the U.S. population has been growing steadily while Europe’s has been stagnant. Europeans may prefer -- and their economies may even be able to withstand -- more leisure time, but they cannot also afford a steady decline in their working-age population.

That, however, is exactly what lies ahead. In Italy, for example, the working-age population is poised to shrink by 20% by 2035, and another 15% by 2050. In France, every 10 workers support four retirees through the social security system. The International Monetary Fund estimates that by 2050, there will be as many French pensioners as workers. The same goes for Germany. So much for the solvency of pension systems.

The French incentive to bump up fertility rates -- under which parents will get about $900 a month if they take a year of unpaid leave after the birth of a third child -- is a step in the right direction. Financial incentives, more liberal leaves for parents with newborns and the greater availability of affordable day care have already helped put birthrates in France and Scandinavian countries well above the European average. This suggests that women will have more children when the state makes it easier for them to balance professional aspirations and family life.

But financial palliatives alone will not be enough to reverse Europe’s demographic descent. In southern Europe, lifestyle preferences, not just economic worries, are depressing birthrates. A smaller percentage of women have entered the workforce in Mediterranean countries than in northern Europe, but women in southern Europe nonetheless choose to have fewer children.

Ultimately, EU countries will have to complement their efforts to raise the fertility rate with two other initiatives: reforming pension systems and immigration policies. Pension reform will require cutting benefits and raising the retirement age -- no easy task among populations accustomed to cradle-to-grave benefits.

The election in Germany last month showed just how difficult it will be to take on the welfare state. When the two main parties advocated much-needed economic reform, the electorate responded by punishing both, leaving no clear winner and raising the prospect of political paralysis regardless of which coalition eventually takes power.

With or without higher fertility rates and pension reform, Europe will have to import labor if it is to replenish its shrinking workforce. But opening Europe’s doors to more immigrants will not be easy either. For now, a good number of the fresh faces will come from the EU’s newest members in Central Europe, where wages are considerably lower than in Western Europe. However, fertility rates in Central Europe are also well below replacements levels, meaning the EU will ultimately have to look to North Africa, Turkey and the Middle East -- where a youth bulge coupled with high unemployment will provide an abundance of willing workers for decades to come. The problem is that most European countries are loath to accept a substantial increase in the size of their Muslim populations. Existing Muslim communities in Europe are not well integrated into the social mainstream. They tend to be isolated and alienated from the dominant Christian populations around them.

It is no accident that Europe’s new constitution was recently rejected in France and the Netherlands, two countries with sizable Muslim populations -- and substantial social tensions as a result. Voters were objecting, in part, to the prospect of unfettered immigration from Turkey should it enter the EU.

If Europeans are to do a better job of integrating Muslim immigrants into their societies -- which they must -- they will need to embrace more fully a civic definition of nationhood, one that welcomes newcomers regardless of origin and religious persuasion. They must also provide language and vocational training; otherwise, immigrants will continue on the fast track to second-class citizenship. And Muslim leaders in Europe have their own work to do, encouraging their communities to pursue integration rather than segregation and supporting politics of moderation rather than confrontation.

It will take more than French mothers to populate Europe. Paris’ plan to produce more Frenchmen had better serve as a wake-up call for ambitious economic and immigration reforms. Otherwise, the EU may soon become a bankrupt retirement home.