BERNBURG, Germany (Reuters) - Helmut Rieche, the proud mayor of this struggling east German town, likes to focus on the positive when describing the changes that have occurred here since the collapse of communism.
The old state-run cement company that polluted the river and turned the town grey with fumes has been closed down, he says. And the elderly of Bernburg, who Rieche says seemed hidden from view under the communists, are out on the streets again.
"We have about 250 citizens that are over 90 years old. The people are living longer and that is a sign that they are prospering here," says Rieche, a grizzled 63-year-old who took over as mayor a year after the Berlin Wall fell in 1989.
But Bernburg, a town of 32,000 that lies 200 km southwest of Berlin, also has a darker side.
It came in last out of 439 German towns, cities and districts in a recent survey of demographic trends by the Berlin Institute for Population and Development.
Dozens of schools in and around town have been closed in recent years as birth rates dropped. Even Rieche concedes that with an unemployment rate of 20 percent, many of the youths that do grow up here will eventually leave to find work.
Citizens over the age of 65 make up nearly a quarter of the population, up from 14 percent in 1990. Only one in 10 Bernburgers is aged 15 or below, half the ratio of 16 years ago.
Bernburg is a microcosm of the nation. Germans are living longer, having fewer children and, according to demographic experts, heading for economic decline and a pension crisis.
"No one knows how the ageing population will change society, but what is certain is that a very old Germany, within an ageing Europe, will be at a competitive disadvantage internationally," says Reiner Klingholz, director of the Berlin Institute.
LOWEST BIRTH RATE
Fewer children were born in Germany in 2005 than in any year since World War Two, government data released last month showed.
With fewer than 1.4 babies per woman, Germany ranks near the very bottom of the 25-nation European Union and, according to the Berlin Institute, the country now has the lowest birth rate in the world relative to its overall population.
At the same time Germans, like their counterparts in other developed nations, are living longer. By 2035, the share of people aged 65 and over is projected to swell to 30 percent of the total population from around 18 percent now.
That trend is not new -- Germany's overall population has been getting older since the 1920s.
But the stark figures have laid bare a creeping problem for German society and sparked national soul-searching over the "me first" values that some say are dissuading Germans from having children and creating a country of selfish loners.
"Minimum", a book which warns of a looming societal crisis where families are the exception and self-centred only-children grow up to have even fewer kids themselves, has been at the top of best-seller lists for weeks.
"The atomisation of our society is not even close to reaching its limits," the book's author Frank Schirrmacher said in a recent magazine interview. "We are in the midst of a demographic transition with crisis-laden effects that we haven't even begun to feel."
Alarm bells are ringing in Berlin, where policymakers are scrambling for ways to encourage Germans to have more children.
Family Minister Ursula von der Leyen, herself the mother of seven children, has vowed to introduce legislation that would make it easier for women to juggle careers and kids -- for example by making kindergartens free and extending school hours.
Most German schools shut in the early afternoon and childcare is rudimentary compared to other European countries like France, which boasts a substantially higher birth rate.
Boosting the birth rate may also require a wholesale change in German attitudes toward child-rearing.
German women who continue to work after having children are disparaged as "raven mothers" for leaving their children alone in a "cold nest". Those seeking a return to the workforce after time off to raise their family complain of bias.
The stakes are high. In the future, far more older Germans will need to be supported by a shrinking number of workers. Immigration could ease the pressure, but not by much if it continues at current intake rates of 100,000 per year.
Already, German public pension outlays represent 12 percent of gross domestic product -- near the top of the EU.
The Paris-based Organisation for Economic Cooperation and Development (OECD) estimates this will increase to 15 percent by 2050. Public spending on health and long-term care is seen rising to 9 percent of GDP from 6 percent, over the same period.
The added burden would strain a budget that has already violated EU deficit limits for four straight years.
"Clearly one of the responses to this is to encourage older people to participate in the workforce longer," says Mark Keese, a senior economist and ageing expert at the OECD.
The German government has taken tentative steps in this direction, agreeing to increase the statutory retirement age to 67 from 65 and make it more costly for workers to take early retirement, but experts say bolder moves are needed.
The impact of Germany's demographic spiral will be felt most acutely in eastern towns like Bernburg, which are already struggling with poor growth and high unemployment.
Employers there will face the ageing of their labour force and a shortage of young, skilled workers sooner and more abruptly than in other parts of Germany.
The result could be rising competition between Germany's regions for an increasingly scarce commodity -- young people.