Will China Help Debt-Stricken Europe?

Introducing writer David Brown, a content manager with a multinational corporation. David writes on a variety of news topics with a strong focus on finance. His interests include money related issues, entertainment news, and a blog The Book Haven.

The European Union might ask for Chinese help to end the ongoing debt crisis. Nicholas Sarkozy has been discussing the sovereign crisis with Chinese president Hu Jintao for quite some time. With Klaus Regling’s (the head of the European Financial Stability Facility — EFSF) visit to Beijing, the speculation has become more intense.

A lot of euro zone countries are trying to persuade China to make investments. It started with Greece and gradually Portugal, Spain and other core members of the euro zone approached China. This reflects the fact that the sovereign debt crisis in the continent is becoming more and more serious.

Renminbi Europe

Renminbi to the rescue?

However, the Chinese have been fairly diplomatic. A lot of encouragement came from their end, but little investment followed.

But the situation is a bit different this time. Previously, investment in the euro zone meant undertaking a lot of risk. But now, China can invest in euro zone debt that is backed by EFSF. This means that China won’t be taking as much risk as the Europeans. However, the Europeans still can’t offer substantial protection in the current situation. China would certainly demand more details before they invest. They would also keep a watch on Greek bond swapping with private creditors.

It is possible that China will join other non-European nations to end this crisis. But will it bargain hard for political advantages for pumping cash into Europe? Not likely. This will make it publicly clear that Europe is not a fit place for investment and China is nothing more than a money machine; the image of Asian big boy will take a hit. Nonetheless, benefits like more representation at the IMF will eventually come because Europe desperately needs Chinese funding, especially for Spanish and Italian debt.

The price of help will also include the recognition of China as a “market economy.” This means that Europe will be vulnerable to cheap Chinese exports in the continent. It is difficult to predict how this will affect the European economy.

The Europeans might also be forced to abolish the export ban of armaments to the Asian economic giant. This might not be safe for world peace, but Europe possibly cannot call off the deal.

The Falling Populations of Europe

Cassandra on Europe

Living in England in the sixties and seventies, I recall that there was great consternation among the scientists that overpopulation would doom Europe to starvation. It didn’t turn out that way.

Today no European country has a replacement total fertility rate of 2.1 and over half are below 1.5. Indeed the World total fertility rate has been falling for 60 years and will continue to do so.

Peak Population

In 2009 I highlighted the falling fertility of Europe. To see the real effect of falling fertility one can look at when populations will peak.

For Europeans, over a third of their countries have already passed their peak population. By 2050 over 75% of European countries will be peaked populations.

Of the twelve countries still to peak after 2050, only Turkey and the United Kingdom, it is estimated, will be growing at over 30,000 a year. In contrast, there will be nine countries that will be losing over 30,000 a year of their populations.

By 2050 European countries will be shedding 2.2 million people a year.

The Future of Europe

The future of European economies does not look promising as their populations fall. A declining population due to low fertility rates is accompanied by population aging. The young will have to increase per-capita output in order to support an infrastructure with costly, intensive care for the oldest among their population.

Many industrial economies have mortgaged the future by way of debt and retirement transfer payments that originally assumed rising tax revenues from a continually expanding population. As there would be fewer taxpayers in a declining population, this can contribute to a lower standard of living.

Because of labor shortages, labor-intensive sectors of the economy may be hurt if the shortage is severe enough. On the positive side, such a shortage increases the demand for labor, which can potentially result in a reduced unemployment rate as well as higher wages.


European Population Prospects

Click ONCE on column headers to sort.

Country1 Peak Year Peak 2010 2050 TFR Year Δ
Hungary 1980 10,707,000 9,973,000 8,934,000 1.34 -26,000
Bulgaria 1985 8,960,000 7,497,000 5,392,000 1.40 -52,000
Armenia 1990 3,545,000 3,090,000 3,018,000 1.35 -12,000
Bosnia & Herzegovina 1990 4,308,000 3,760,000 3,008,000 1.24 -28,000
Estonia 1990 1,567,000 1,339,000 1,233,000 1.42 -3,000
Georgia 1990 5,460,000 4,219,000 3,267,000 1.44 -28,000
Latvia 1990 2,663,000 2,240,000 1,854,000 1.29 -8,000
Lithuania 1990 3,698,000 3,255,000 2,579,000 1.22 -16,000
Romania 1990 23,207,000 21,190,000 17,279,000 1.38 -120,000
Ukraine 1990 51,583,000 45,433,000 35,026,000 1.25 -237,000
Belarus 1995 10,270,000 9,588,000 7,275,000 1.23 -67,000
Croatia 1995 4,669,000 4,410,000 3,825,000 1.41 -18,000
Moldova2 1995 4,432,603 4,317,483 3,635,357 1.26 -27,066
Poland 1995 38,595,000 38,038,000 32,013,000 1.27 -222,000
Russia 1995 148,497,000 140,367,000 116,097,000 1.40 -600,000
Serbia 1995 10,204,000 9,856,000 9,193,000 1.69 -28,000
Germany 2005 82,409,000 82,057,000 70,504,000 1.41 -400,000
Italy 2015 60,604,000 60,098,000 57,066,000 1.30 -162,000
Portugal 2015 10,787,000 10,732,000 10,015,000 1.49 -40,000
Greece 2020 11,284,000 11,183,000 10,939,000 1.36 -21,000
Slovakia 2020 5,442,000 5,412,000 4,917,000 1.34 -24,000
Slovenia 2020 2,053,000 2,025,000 1,954,000 1.27 -4,000
Andorra2 2025 85,112 84,525 74,765 1.32 -715
Czech Republic 2025 10,573,000 10,411,000 10,294,000 1.23 -8,000
Macedonia2 2025 2,119,511 2,072,086 1,990,728 1.58 -8,497
Albania 2030 3,416,000 3,169,000 3,303,000 2.02 -10,000
Finland 2030 5,544,000 5,346,000 5,445,000 1.73 -5,000
Liechtenstein2 2030 37,933 35,002 35,911 1.51 -37
Malta 2030 427,000 410,000 413,000 1.51 -1,000
Montenegro 2030 634,000 626,000 618,000 1.83 -1,000
Austria 2035 8,639,000 8,387,000 8,515,000 1.38 -11,000
Denmark 2035 5,621,000 5,481,000 5,551,000 1.74 -6,000
Monaco2 2035 32,550 30,586 29,810 1.75 -281
Netherlands 2035 17,572,000 16,653,000 17,399,000 1.66 -18,000
San Marino2 2040 36,311 31,477 35,178 1.35 -150
Azerbaijan 2045 10,614,000 8,934,000 10,579,000 2.05 -7,000
Iceland 2050 407,000 329,000 407,000 1.91 0
Belgium After 2050 After 2050 10,698,000 11,493,000 1.65 4,000
Cyprus After 2050 After 2050 880,000 1,175,000 1.79 6,000
France After 2050 After 2050 62,637,000 67,668,000 1.98 1,000
Ireland After 2050 After 2050 4,589,000 6,295,000 1.85 30,000
Kazakhstan After 2050 After 2050 15,753,000 17,848,000 1.88 9,000
Luxembourg After 2050 After 2050 492,000 733,000 1.78 6,000
Norway After 2050 After 2050 4,855,000 5,947,000 1.78 18,000
Spain After 2050 After 2050 45,317,000 51,260,000 1.30 27,000
Sweden After 2050 After 2050 9,293,000 10,571,000 1.67 26,000
Switzerland After 2050 After 2050 7,595,000 8,514,000 1.44 18,000
Turkey After 2050 After 2050 75,705,000 97,389,000 1.87 191,000
United Kingdom After 2050 After 2050 61,899,000 72,365,000 1.66 211,000

Table3 last updated January 8, 2011

Notes

1. The meaning of the column headers:

  • Country — All European countries except the Vatican.
  • Peak Year — The estimated population peak year, to a resolution of 5 years.
  • Peak — The estimated population peak.
  • 2010 — Essentially the current population.
  • 2050 — The estimated population in 2050.
  • TFR — The Total Fertility Rate is the average number of children that would be born to a woman over her lifetime.
  • Year Δ — The estimated yearly change in population from 2045 to 2050.

2. International Data Base, all others World Population Prospects.
3. The more conservative medium fertility variant was used for most countries. Fertility is assumed to converge eventually toward a level of 1.85 children per woman. However, not all countries reach this level by 2045-2050. Projection procedures differ slightly depending on whether a country had a total fertility above or below 1.85 children per woman in 2005-2010.

Sources

External Articles

This list is updated occasionally, with newer additions listed first.

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The Falling Fertility of Europe

Europe's birthrate is falling

Europe's birthrate is falling

Total Fertility Rate

In Europe there are significant decreases in birthrates. The replacement fertility rate is roughly 2.1 births per woman for most industrialized countries. The Total Fertility Rate (TFR) of a population is the average number of children that would be born to a woman over her lifetime. All of the European countries have a TFR less than the replacement rate of 2.1. The average is 1.53 and Lithuania records the lowest TFR at a rickety 1.22 (see the table at the end of this post).

Why?

So why are women in Europe having less babies? A New York Times article No Babies? attempts to answer this question. It concludes that there would seem to be two models for achieving higher fertility: the neosocialist Scandinavian system and the laissez-faire American one. The socialist model helps families with generous government support. The U.S. has a much more flexible work environment which can be helpful to families. In the article, Arnstein Aassve, a sociologist, put it this way:

You might say that in order to promote fertility, your society needs to be generous or flexible. The U.S. isn’t very generous, but it is flexible.

The article briefly mentions that some blame the low birthrate to secularism. That “the West has divorced itself from God and church and embraced a self-interested and ultimately self-destructive lifestyle abetted above all by modern birth control.”

Religion and Fertility

In 2007 the TFR in the United States rose to 2.1, the highest since the 1960s. A factor contributing to this healthy birthrate is the conservative and religiously oriented nature of American society, which encourages larger families. Closer to my home, Utah has a TFR of 2.6, attributed to the 69% Mormon population that traditionally have larger families primarily motivated by religious belief. Even closer to home, my wife and I have five children. Prior to my adult conversion to the Gospel I had planned for no children. As a member of the Church my views on children changed as I learned about the purpose of life and why God has placed us here on Earth.

A Warning

Not only in Europe but world-wide there are declining birthrates. The world TFR has fallen to 2.61 in 2008 from 2.80 in 2000. But Europe is in the most critical situation. Carl Haub of the Population Reference Bureau, in discussing Spain and Italy said:

Maybe tinkering with the retirement age and making other economic adjustments is good. But you can’t go on forever with a total fertility rate of 1.2. If you compare the size of the 0-to-4 and 29-to-34 age groups in Spain and Italy right now, you see the younger is almost half the size of the older. You can’t keep going with a completely upside-down age distribution, with the pyramid standing on its point. You can’t have a country where everybody lives in a nursing home.

And a more direct warning from The Church of Jesus Christ of Latter-day Saints:

We warn that individuals who violate covenants of chastity, who abuse spouse or offspring, or who fail to fulfill family responsibilities will one day stand accountable before God. Further, we warn that the disintegration of the family will bring upon individuals, communities, and nations the calamities foretold by ancient and modern prophets. (The Family: A Proclamation to the World)

Children are so often seen as boat anchors, a drag on society, and consumers of resources. But children are the future. Only by populations increasing into the millions have many advances been possible. Let’s not throw it all away.

European 2008 Total Fertility Rate by Country

Click ONCE on column headers to sort.

Country TFR
Albania 2.02
Andorra 1.32
Armenia 1.35
Austria 1.38
Azerbaijan 2.05
Belarus 1.23
Belgium 1.65
Bosnia and Herzegovina 1.24
Bulgaria 1.40
Croatia 1.41
Cyprus 1.79
Czech Republic 1.23
Denmark 1.74
Estonia 1.42
Finland 1.73
France 1.98
Georgia 1.44
Germany 1.41
Greece 1.36
Hungary 1.34
Iceland 1.91
Ireland 1.85
Italy 1.30
Kazakhstan 1.88
Latvia 1.29
Liechtenstein 1.51
Lithuania 1.22
Luxembourg 1.78
Macedonia 1.58
Malta 1.51
Moldova 1.26
Monaco 1.75
Montenegro 1.83
Netherlands 1.66
Norway 1.78
Poland 1.27
Portugal 1.49
Romania 1.38
Russia 1.40
San Marino 1.35
Serbia 1.69
Slovakia 1.34
Slovenia 1.27
Spain 1.30
Sweden 1.67
Switzerland 1.44
Turkey 1.87
Ukraine 1.25
United Kingdom 1.66
Average 1.53

 

Sources

CIA World Factbook
European Demographic Data Sheet 2008 (PDF)
Population Growth Rates — Pick your own countries to compare with Google Public Data Explorer

External Articles

This list is updated occasionally, with newer additions listed first.
The vanishing workforce — Germany will lose 20% of its workers.
Lithuanian census reveals population slump — Dropped 10% in a decade.
Germany Faces Economic Downturn with Falling Births — Aging also a factor.
The new baby boom — Average number of children a woman has is 2.8
Spain’s cash-for-kids plan fails to boost birth rate
Hungary Population Drops to Less Than 10 Million for First Time Since 1960
Rumkin.com Population Counter — Watch the German population decreasing.
Latvia: The Demographic Price Of Procrastination
Population Consequentialism
In need of a miracle
Eastern Germany Confronts Skilled Labor Shortage

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