Retiree Rights

On East German Pensions, Merkel Risks a Costly Commitment

merkel-fuchs
The German chancellor's promise to raise the pensions of former East Germans could win her party votes in upcoming elections.
  • Why it matters

    Why it matters

    Facing elections in three eastern German states, Chancellor Angela Merkel’s call for pension parity may earn her Christian Democrat Party votes.

  • Facts

    Facts

    • A special retirement allowance for eastern Germans was created because their much lower wages in the former Communist half of the country would have led to poverty-level pensions.
    • Workers in the east who have paid into their pensions since reunification will receive €210 per month more than those with comparable wages in the west.
    • Many struggling regions in western Germany also have low wages, but no pension boost.
  • Audio

    Audio

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Just in time for the 25th anniversary of the fall of the Berlin Wall, Chancellor Angela Merkel has finally promised eastern Germans parity for state pensions. Nearly a quarter of a century after unification, this remains the only area where East and West Germans are treated differently legally.

The chancellor’s announcement that pensions parity will be reached by 2020 at the latest is very popular and is likely to make voters in the upcoming eastern state elections in Saxony in August and in Thuringia and Brandenburg in September favorably disposed to vote for her Christian Democrats.

But the popularity of this effort masks a basic misunderstanding about what the German division of statutory pensions is all about. The widespread belief – one now enthusiastically cultivated by Mrs. Merkel – is that the eastern German retirees were worse off than their western German cousins because lower wages in the formerly communist east resulted in lower pension entitlements. Yet exactly the opposite is true.

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