Pension age debate threatens to splinter Germany’s fragile coalition
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Version 0 of 1. Merz walks fine line as ‘lazy Germans’ debate sparks protest and economy minister calls to raise retirement age to 70 The fact that ageing Germany’s generous pension system is unsustainable is political Berlin’s worst-kept secret, but a controversial call to save it by hiking the retirement age to 70 has sparked howls of protest and threatened to destabilise the fractious government. The chancellor, Friedrich Merz, has largely sidestepped the ticking timebomb of the greying population since taking office in May, preferring instead to announce sweeteners such as tax breaks for older Germans to continue working past the retirement age. However his economy minister, Katherina Reiche of the Christian Democrats (CDU), a former energy executive who grew up in the communist east, has stepped into the breach with repeated calls this summer to get real about old-age benefits. “Demographic change and ever-increasing life expectancy make it unavoidable: the lifetime labour period must increase,” she told the daily Frankfurter Allgemeine Zeitung late last month. “We have got to work more and longer.” She said a major economic thinktank, the DIW, had argued two decades ago that the minimum pension age should be 70 by 2025 but that instead most Germans were on track to spend “only” two-thirds of their lives employed – a ratio she described as untenable. A displeased Merz reportedly told her, quietly, to stay in her lane and show consideration for the concerns of the twitchy Social Democrats (SPD), junior partners in the ruling coalition who are polling at a meagre 15%. But the outspoken Reiche doubled down, insisting that for many Germans, “happiness is not about retiring as early as possible but being able to still bring their experience to bear”. The SPD did not wait long to pounce, with pension age threatening to become a wedge issue in the fragile centre-right coalition government that replaced the previous three-way administration that collapsed in November. The SPD general secretary, Tim Klüssendorf, said flatly: “A hiking of the pension entrance age is out of the question for us.” He described any such move as in effect a pension deduction. He argued for increasing contributions to the system by making it more attractive for women to work full-time, including expanding childcare and fostering job flexibility. Many economists back such a move, saying integrating more people into the workforce, including immigrants, would make a lasting contribution toward keeping the state scheme in balance. Other analysts have suggested pegging the retirement age permanently to the average life expectancy, as practised in the Netherlands. The German labour minister, Bärbel Bas of the SPD, has suggested tax increases and a requirement of freelancers, civil servants and MPs to pay into the pension system – proposals the conservatives have rejected out of hand. The writing, however, is on the wall: in the mid-1990s there were four employees paying into the social welfare system for every pensioner. By 2020, it was only three, and projections indicate that by 2035 the figure will be 2.4. Germany already shows higher-than-average labour market participation among 65- to 69-year-olds, with 21.2% in that age bracket listed as employed versus 16% in the EU. The average German pension start age in 2024 was 64.7. Denmark’s parliament in May put the country on course to having the highest retirement age in Europe by adopting a law raising it to 70 by 2040. The SPD in the 2000s, when Germany reported more than 5 million jobless, spearheaded the biggest structural changes in decades by overhauling the labour market with a stick-and-carrot approach to unemployment and gradually raising the retirement age to 67 by 2031. The CDU general secretary, Carsten Linnemann, has said that kind of “courage” was needed again, hoping that Germany’s similarly gloomy economic mood now with its “back to the wall” would spur on painful, necessary overhauls. But with fears rampant that Germany’s once vaunted work ethic will prove insufficient to sustain its social welfare system, Merz drew ire earlier this year with comments widely interpreted as a swipe at “lazy Germans”. The chancellor, who will himself turn 70 in November, warned at a business conference in May: “We won’t be able to maintain the prosperity of this country with a four-day week and work-life balance.” He sought to fine-tune his message last month, explaining he was not saying “all Germans need to work more” but rather that the national average needed to be lifted. His coalition has said it will ensure a pension level of 48% of average lifetime income until 2031, a pledge critics have said is unfair to future generations without a clear plan for sustaining the system. |