Morgan Stanley calculates ageing population, military spending and interest payments could add 3 percentage points of GDP in additional expenditure in Eurozone

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In this context, growth ceases to be merely an economic objective and becomes the main determinant of European fiscal sustainability. By Morgan StanleyEurope is entering a new fiscal regime in which an ageing population, rising defence spending and higher borrowing costs are coming up against increasingly tight budgets. Looking ahead to 2040, an ageing population, military spending and interest payments could add around 3 percentage points of GDP in additional expenditure in most European countries and more than 5 percentage points in Spain and Portugal. Instead, the most realistic strategy would be to prioritise economic growth. In this context, growth ceases to be merely an economic objective and becomes the main determinant of European fiscal sustainability.