The demographic winter: watch out for slippery financial conditions
France should be ready “to lose its children” in the event of an armed conflict, according to the Chief of Staff of the French Armed Forces. This statement, made on 20 November 2025, provoked major shockwaves. However, France is already losing its children, albeit in a less dramatic manner, as a proportion of its population. The number of births in relation to deaths has been declining to such an extent that, in May 2025, the 12-month French natural balance tipped into negative territory for the first time since 1945. Projections by the Institut national d’études démographiques (French Institute for Demographic Studies) confirm this trend: the French natural balance is likely to remain structurally negative from 2027, with the trend accelerating.[1]
France is not alone. Japan is losing close to a million inhabitants a year, once (very low) immigration is excluded. In Europe, Germany and Italy are heading up the funeral procession: their natural balance has been negative for several years. Only immigration is enabling them, in good times and bad, to remain afloat, but for how long? Eastern Europe and Russia are seeing an even worse deterioration in their natural balances, even before taking into account Russian lives lost due to the war in Ukraine, which are estimated at several hundreds of thousands.
The United States is the outlier among the major industrialised nations. This is not because of its natural balance, which is also deteriorating strongly and will – according to the Congressional Budget Office – slip into the red in 2031, but due to its immigration, which has to date been stronger. The US population should thus continue to grow in the coming decades, unless the country’s immigration policy becomes more restrictive as demanded by Donald Trump, and this would represent a major cost.
How will these countries with a declining population develop from an economic perspective? According to the consensus, prudential savings are likely to grow at the expense of investment. In principle, productivity gains will be under pressure, as will national budgets, subject to rising costs linked to the ageing population as the volume of taxable work declines.
In response to these merciless developments, countries in Northern Europe and Japan are adopting drastic solutions: raising employment levels among older citizens, pushing up the retirement age and encouraging combined employment/retirement. Immigration would be one solution from an economic perspective, but it is socially and politically problematic. In this situation, the economic survival of countries with ageing populations must be based on the replacement of human work by technology, and harvesting the wealth created by the work produced in countries with younger populations. Ideally, investment by countries with ageing populations in companies in countries with younger populations should bring advantages for both sides. On the one hand, the returns from work in countries with younger populations will enable the inhabitants of countries with ageing populations to improve their financial situation. And on the other, the capital invested provides productive countries with the opportunity to develop their own economies. However, if these flows are badly managed or if the terms of exchange are out of balance, there is the risk of a sort of vampire effect by ageing countries on countries with younger working populations. But a vampire needs to keep its victim in good health and is ultimately dependent on its victim.
In any case, a tectonic shift in the split of work across the globe is unavoidable in the medium term, whether we deal with or simply suffer the consequences. At the very least, assets in countries with favourable demographic profiles should rise as a proportion of the portfolios of countries with ageing populations. This will help them survive the demographic winter that is coming.