GOTHENBURG, Sweden (AFX) - The expansion of private pension plans in the euro zone is likely to lead to an increase in crossborder investments, European Central Bank president Wim Duisenberg said. "Population ageing will lead to further demand for long-term investment instruments on the part of pension funds. In addition, the need for portfolio diversification may drive up the volume of cross-border investments, including investments in emerging markets with a more favourable demographic structure," Duisenberg said in a speech at the the inauguration ceremony of the second Swedish national pension fund. The ageing of the population in euro zone countries means that a move towards funded pension systems is necessary, because pay-as-you-go systems can only adjust to such demographic changes by reducing benefits or increasing contributions, which would have a negative impact on the labour market, he said. "We should not be afraid of a stronger role for privately managed funded systems. Such systems have the advantage of efficient administration and an absence of political interference. They may also induce increased private savings," he said. Debt financing of the gap between contributions and payments in pay-as-you-go systems is not a viable alternative, said Duisenberg. "Given the public knowledge of the pension system dynamics, participants in financial markets would anticipate the unsustainability of delaying pension system reform and require higher risk premia on new debt," he said. Fiscal policies will in any case be affected by population ageing through other routes, such as increased expenditure on healthcare. Governments should therefore be aiming to post budget surpluses in the years before these costs rise significantly, he said. "This would allow them either to reduce their public debt, which would lead to lower interest payments and more scope for an increase in expenditure relating to population ageing, or to establish special funds to be used to finance this additional expenditure," he said.