Experts criticize gov’t plans for major overhaul of pensions system in Germany

BERLIN, Aug. 21 — Prominent academic experts have sharply criticized recent proposals by the federal government for an overhaul of the national pensions system in Germany on Tuesday.
Speaking to the newspaper “Sueddeutsche Zeitung” (SZ), Bernd Raffelhueschen, professor of economics at the University of Freiburg, warned Berlin that a pension level equivalent to 48 percent of their current income would be “unaffordable and unfair for younger generations.”
Raffelhueschen hereby responded to a widely-publicized call by Finance Minister Olaf Scholz (SPD) to expand a grand coalition promise to guarantee that level to citizens until and beyond the year 2025.
Axel Boersch-Supan of the Max-Planck-Institute for Social Policy also told SZ that the cost of establishing such a fixed and universal threshold would rise steeply from 40 billion euros (46.1 billion U.S. dollar) per year in 2023 to 100 billion euros in 2040 as the German population continues to age. The budgetary gap which would have to be filled as a consequence would be equivalent to raising value added taxes (VAT) in Germany from 19 to 26 percent.
Boersch-Supan’s fellow academic Raffelhueschen estimated that Scholz’ plan would come at a long-term cost of as much as three trillion euros, forcing fiscal authorities to take the more drastic step of raising share of incomes which is reserved for the German pensions system. “Young employees would face an even higher fiscal burden and the acceptance of the pensions system would decline”, he said.
The gloomy predictions made by Boersch-Supan and Raffelhueschen stand in stark contrast to the benefits which Finance Minister Scholz associates with a 48 percent pension level. The SPD politician has described a corresponding overhaul of the German pensions system as being critical to alleviate citizens’ concerns about socio-economic inequality and hence prevent the rise to power of a populist politician like U.S. President Donald Trump.
A spokesperson for Scholz told press that the finance minister was still open to diverse suggestions although the “clear goal” of the public debate which he had started on pensions was to nip “populist tendencies” in the bud. Chancellor Angela Merkel (CDU) has similarly identified reforms of Germany’s public pension system as key policy priority for her ruling cabinet but said that it would ultimately be the task of an independent expert commission appointed by the government to make concrete proposals.
While highlighting the priority which Merkel attaches to the issue, her spokesperson Seibert recently emphasized that the chancellor would not intervene with the work of the independent commission. Seibert noted that the 2020s in particular would become a critical period for the German social insurance system when a large number of citizens from the so-called post-war baby boomer generation are expected to retire.
The heated debate on pensions reflects growing popular concern about the fiscal and economic consequences of the ongoing demographic change in Germany.
A study by the Bertelsmann Foundation has found that nearly two thirds (65 percent) of Germans associate risks with an ageing population for themselves, including falling into old-age poverty, having to worker longer and a need to pay higher salary contributions towards pension schemes. – XINHUA