German government row over pensions
Published: Friday, Sep 27th 2024, 14:40
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With its plans for the long-term stabilization of pensions in Germany, the governing "traffic light" coalition has its next major conflict ahead of it.
Labor Minister Hubertus Heil (SPD) warned during the first discussion of the pension reform in the Bundestag, which has been in preparation for months, that pensioners would become poorer if it failed. The FDP parliamentary group insisted on significant improvements to the plans presented jointly by Heil and Finance Minister Christian Lindner (FDP). According to the opposition Christian Democrats, Pension Package II cannot be sufficiently corrected: They therefore called on the FDP to leave the coalition.
Minister Heil defended the plans. He said it was the responsibility of the federal government to give people security. "And that applies above all to security in old age." The basis of old-age security remains the statutory pension. For many - especially in eastern Germany - it is the only security. Green pension expert Markus Kurth said that people should receive long-term stability and security.
FDP demands corrections
The Parliamentary Secretary of the FDP parliamentary group, Johannes Vogel, did not join the harmony of the traffic lights. "This law is not yet finished," he said. Stabilizing the pension could not mean: "We are simply increasing the contributions for the working middle class and for the young." Vogel was certain, however, that compromises and a "better solution" were possible. CDU/CSU parliamentary group deputy Mathias Middelberg considered it completely unrealistic to achieve what Vogel wanted. The FDP would have to break up the coalition.
The planned law is intended to protect the more than 21 million pensioners in Germany from a drop in their pensions. "We will prevent this by ensuring that the pension level remains permanently stable for all generations," Heil told the German Press Agency. A falling pension level would mean that pensions would no longer keep pace with rising wages in Germany. The ratio of pensions to wages should remain the same as before, but should no longer fall below 48% of the average wage by 2040. The government in office at that time is to make new proposals as early as 2035.
Why the reform should come
Heil had originally announced the reform for 2022. According to Heil, there is acute pressure to act because the baby boomers are now retiring. "We have to decide," said the minister. It is a directional decision.
Pensions in Germany recently rose by 4.57% on July 1 - the first time in years that they have noticeably exceeded the inflation rate. In the previous two years, pension increases had also consistently been well above four percent in some cases - before that, pensions had stagnated due to the coronavirus crisis. Heil explained that without stabilization of the pension level, the purchasing power of pensioners would fall from 2027.
Foretaste of the next pension dispute
SPD leader Lars Klingbeil warned the FDP against a blockade. "What we have agreed must happen," Klingbeil told dpa. "I can't quite understand why the FDP parliamentary group is now rebelling against its own party leader."
In the plenary session, Heil gave a foretaste of the expected fierce pension debates in the upcoming parliamentary election campaign. He emphasized that the regular retirement age of 67 should not be touched under any circumstances. Heil accused the CDU/CSU and their candidate for chancellor Friedrich Merz of relying on a further increase in the retirement age or accepting lower pensions.
How contributions are rising
The current contribution rate is 18.6% of income, half of which is paid by employers. Without reform, it would rise to 20.2 percent by 2030 and 21.3 percent by 2040, according to the forecast. The planned safeguarding of the pension level alone would even cause the contribution rate to rise to 22.6 percent by 2040 according to the law. But Heil promises: "We will ensure that contributions do not rise too sharply in the second half of the 30s."
This is where the part of the law pushed through by the FDP comes into play: the generation capital. In an interview, Lindner spoke of a "turning point in German pension policy, that we will now also invest in securities in the area of statutory pension insurance". Although the government wants to take on debt for this, it will not be counted towards the debt brake.
©Keystone/SDA
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