It is widely held that the financial mess the world's advanced economies find themselves in is a hangover from the funds spent in recent years to rescue failed banks and bail out heavily indebted homeowners.

There are elements of this view that are important in explaining and understanding the financially-stressed state of many advanced economies. However, in explaining sovereign stress, bailout spending pales into insignificance when compared to the social spending obligations of advanced economies.

In a note published today in Times Online , Anatole Kaletsky highlights the argument that the acute stress placed on advanced economy's financial resources does not come from the afterburn of a war on sub-prime lending, but rather demographic forces that were put in place sixty years ago. As Anatole puts it: "This is the age of the war between the generations".

This is the age of war between the generations: Never mind the credit crunch, it’s all those retiring baby-boomers who threaten us with national bankruptcy

Yesterday was my 58th birthday. If I were a Greek worker I could retire. Although pension payments in Greece normally start around 61, special provisions allow anyone to retire at 58 if they have been in employment for 35 years. That, as it happens, is how long I have been at work. My index-linked pensions from the Greek Government would be worth 75 to 90 per cent of the average salary in the country, guaranteed for the rest of my life by the State.

If you want to know why Greece is going bankrupt and why the euro seems to be on the verge of disintegration, look no farther. The best argument I have ever heard for a break-up of the euro was this observation in a German newspaper: “The Greeks go on to the streets to protest against an increase of the pension age from 61 to 63. Does this mean that Germans should extend the working age from 67 to 69, so Greeks can enjoy their retirement?”

This, however, is not another article about self-indulgent Greeks and self-righteous Germans. The battle over bailouts in Europe is only a sideshow compared with the great social conflict that lies ahead all over the world in the next 20 years. This will not be a struggle between nations or social classes, but between generations — and it is a conflict that, in Britain, begins in earnest this year. The end of the Second World War in May 1945 marked the start of the baby boom, which lasted until the mid-1960s. Now, 65 years later, the corresponding retirement revolution is about to shake up our society, economy and political institutions.

If the word “revolution” sounds like an overstatement, consider the most important issue in British politics today — and then let me draw your attention to the most important book about this issue, written, as it happens, by a senior minister in the new Government. The issue is, of course, the unsustainable size of the public deficit. The book is called The Pinch by David Willetts, the Tory Minister for Universities, and its subtitle conveys his main message with his characteristic clarity and directness: “How the baby-boomers took their children’s future and why they should give it back.”

Mr Willetts shows how the overwhelming size of the baby boom generation, in comparison with the generations just before and after, allowed people born in the two decades after VE-Day not only to dominate culture, fashion and morality, but also to accumulate wealth, monopolise employment and housing and reduce social mobility for the next generation.

But strangely, however, nobody — least of all an active politician like Mr Willetts — seems to make the connection between long-term intergenerational tensions and the present controversies over public spending and taxes.

Why, for example, are governments everywhere running out of money, not just in Britain and Greece, but also in America, Germany, Japan and France? Why are taxes relentlessly rising in all advanced capitalist countries? And why is public spending being cut on schools, universities, science, defence, culture, environment and transport, while spending on health and pensions continues to rise?

The populist answer to these questions is that we are all about to pay for the greed of the bankers. But this is not true. According to IMF calculations, the credit crunch, bank bailouts and recession only account for 14 per cent of the expected increase in Britain’s public debt burden. The remaining 86 per cent of the long-term fiscal pressure is caused by the growth of public spending on health, pensions and long-term care. The credit crunch and recession did not create the present pressures on public borrowing and spending. They merely brought forward an age-related fiscal crisis that would have become inevitable, as by 2020 the majority of the baby-boomers will be retired.

The rational solution to this fiscal crisis would be for governments to reduce their spending on pensions, health and longterm care. Yet these are precisely the “entitlements” protected and ring-fenced by politicians, not just in Britain but also in America and many European countries, even as other government programmes are ruthlessly cut.

The politics of the next decade will be dominated by a battle over public spending and taxes between the generations. Young people will realise that different categories of public spending are in direct conflict — if they want more spending on schools, universities and environmental improvements they must vote for cuts in health and pensions.

Schools and universities are more important for a society’s future than pensions. Yet every democracy around the world has made the opposite judgment. While many politicians claim to be obsessed with education — recall Tony Blair’s three priorities were “education, education and education” — in reality they support health and pensions to the point of national bankruptcy, while squeezing universities. The same applies to the many fiscal benefits heaped on pensioners over the years. Is it, for example, better for society to offer free bus travel to wealthy 80-year olds rather than students or impoverished youngsters looking for their first job?

Why are such conflicts of interest between old and young never debated? Partly because of the myth that pensioners are “entitled” to their many benefits because they have “paid their dues” through national insurance and taxes. This is simply untrue. The true value of the average baby-boomer’s benefits is 118 per cent of the taxes they paid, according to Mr Willetts — and higher according to other calculations.

Second, and more importantly, the baby boomers are so numerous that no politician dares to campaign against their interests. Moreover, older people are more likely to vote. As a result democracies will increasingly be held hostage to the special interests of “grey panthers”, whose power will steadily grow as more baby-boomers retire.

Will politics therefore degenerate into a conflict between the dwindling number of voters with children, who care about education and the future, and the massive power of pensioners with shorter time horizons? Here is a modest proposal to avert this awful outcome. Since children under 18 are not allowed to vote, perhaps pensioners could be deprived of the right to vote after 75 or 80. An equally effective alternative would be to give mothers an extra vote for every child under voting age. Since no such reforms are ever likely, I look forward to the Greek Government being forced to sell the Parthenon — and to Oxford and Cambridge being turned into luxury old people’s homes.