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Slowing Birthrates Weigh on Europe’s Weak Economies

Saturday 12 January 2013


MELGAÇO, Portugal—This small town is facing another year of austerity enforced by Portugal’s bailout lenders, but there is one category of expenses the mayor says he won’t cut: birth incentives—the awards of up to €1,000 ($1,300) to new mothers, as well as free nursery services and tax breaks on homes for young couples.

"That’s an area we must continue doing what we can to help," said António Rui Esteves Solheiro, who has governed Melgaço for more than three decades. "It’s about our future."

Mr. Solheiro’s efforts are driven by the stark demographics accompanying Portugal’s downturn. The number of newborns and new immigrants in town isn’t offsetting the number of residents who die, most of them in the 65-and-older age group that makes up more than one-third of the population of 9,172. Just 33 babies were born in Melgaço last year, half the average during the boom of the previous decade.

If the trend continues, Mr. Solheiro said, the economy of this relatively prosperous town on Portugal’s northern tip will falter. "Our activities, which include production ofvinho verde [a white wine] and smoked sausages, are currently profitable," he said, "but there isn’t much growth potential beyond this with the population we have."

Communities across the Continent, particularly in countries hit hard by the euro-zone debt crisis, are recording drops in birthrates that experts say could speed the decline and aging of a European population already struggling with low economic growth and high public spending. Europe-wide, birthrates have been declining for decades, but rates had begun to increase some during the boom.

Tomas Sobotka, a research scientist at the Vienna Institute of Demography, estimated that of the 22 European Union countries with comparable data, 15 have registered a drop in fertility rates—the number of children a woman is expected to have during her lifetime—since the financial crisis started in 2008. That contrasts with a rise in 19 of the 22 countries during the boom years of 2005 to 2008, he said.

Experts say a 2.1 fertility rate is needed to keep the population stable, assuming net migration is zero. In crisis-stricken Greece, the fertility rate dropped to an estimated 1.43 in 2011 after rising to 1.51 in 2008 from 1.27 in 2000, Mr. Sobotka said. Official data from Greece show abortions there rose 50% to 300,000 in 2011 from 2010.

In Spain, which has one of the highest unemployment rates in Europe, the fertility rate fell to 1.36 in 2011, after increasing to 1.46 in 2008 from 1.23 in 2000, according to Mr. Sobotka’s data.

In Ireland, the economy is still growing despite the country’s austerity regime, begun when it took a bailout in 2010. The Irish birthrate registered only a modest fall in 2011, Mr. Sobotka said, to 2.05 from 2.1 in 2008. In Portugal, the number of births in 2012 is expected to tally around 90,000, the lowest level in more than 60 years.

"Birthrates in Portugal have been so low for such a long time that even if the falling immigration eventually increases again, it won’t be enough to sustain the population," said Maria Filomena Mendes, president of the Portuguese Demography Association. Ms. Mendes estimates the country’s population will be close to nine million by 2030, down from the current 10 million.

Spain’s national statistics agency estimates that nation’s population could fall 10%, to 41.5 million, by 2052 as more people die than are born, even taking into account an eventual upturn in immigration.

The Vienna institute estimates that by 2050, people 65 and older will account for one-third of the populations of Portugal, Spain and Greece, up from about 18% currently.

"Along with a population fall, we will obviously see fewer productive people financially supporting an increasingly older population," Ms. Mendes said, referring to conditions in Spain, Portugal and Greece. "That will have consequences not only on economic growth prospects, but also raise questions on how to afford a ballooning pension system."

In Melgaço, that future is now. Mr. Solheiro, the mayor, said the elderly absorb a good part of his €20 million annual budget, which includes projects to improve transportation for seniors, discounts on cultural and sports events and even improvements to the town’s cemeteries.

While those expenses will continue growing, he said, the town’s economic output won’t, because the economically active population, which currently accounts for slightly more than half the residents, is expected to continue falling.

"It’s a real challenge," he said. "We try to give incentives to mothers, but the crisis is bringing so much uncertainty, we can’t fight against that." Kelly Paula Rodrigues Bento, a 28-year-old from Brazil who works as a waitress in a Melgaço cafe, agreed. She had her first child in 2011. But after living for five years in Portugal, Ms. Bento said she plans to return to Brazil with her son and her husband, who can no longer count on temporary construction jobs in neighboring Spain since that country’s housing boom collapsed.

"When I got pregnant in 2010, things weren’t as bad, but now they are and we don’t know when they will improve," Ms. Bento said. "I may eventually have a second child. But it won’t be here."

—Darcy Crowe contributed to this article.

Write to Patricia Kowsmann at patricia.kowsmann@dowjones.com A version of this article appeared January 8, 2013, on page A12 in the U.S. edition of The Wall Street Journal, with the headline: Slowing Birthrates Weigh on Europe’s Weak Economies.

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