If you want to know why I’m pessimistic about Europe (particularly compared to the U.S.), this chart is a good example.

It shows that many European nations have enormous long-run liabilities for their Social Security systems.

It’s an understatement to observe that Spain, Austria, and Italy have very grim fiscal futures.

Keep in mind that this chart just measures government old-age retirement obligations (the red bars) and does not count spending for healthcare and other programs.

So the overall fiscal outlook is much worse that indicated by the chart.

Notice, however, that not all European nations are alike.

Countries with significant pink bars have private or semi-private Social Security systems (i.e., systems that are “funded” with mandatory private savings).

Indeed, I’ve specifically analyzed the private retirement systems in the Netherlands (one of the best in the world), Switzerland, Sweden, and Denmark (and obviously need to write about Iceland sometime soon).

And I also need to dedicate a full column to Greece, which has recently adopted private retirement accounts. That country will be digging out of a deep hole, but it’s worthy noting that the burden of Social Security spending will actually decline over the next few decades (explained in a study I co-authored late last year).

For American readers, I have to acknowledge that we can’t throw too many stones since we’re in a glass house. Social Security’s 75-year cash-flow shortfall is nearly $66 trillion. Not billion, trillion.

Not as bad as some European nations, but still grim news (and our fiscal data is downright scary when you include the unfunded promises for Medicare and Medicaid).

We definitely need personal retirement accounts in the U.S (as well as reform of other entitlement programs).

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Image credit: Pedro Ribeiro Simões | CC BY 2.0.