Creaking Infrastructure

Without Investment, No Welcome for Refugees

Refugees receive training at Cucula, a non-profit initiative. DPA
Refugees receive training at Cucula, a non-profit initiative. DPA
  • Why it matters

    Why it matters

    Germany won’t be able to tackle the refugee crisis unless the state finally starts investing in education and infrastructure.

  • Facts

    Facts

    • In 2014 the German government’s pension reforms lowered the retirement age from 65 to 63 for some people.
    • This reversed a move by the previous Merkel-led grand coalition with the SPD to gradually raise the retirement age to 67 between 2012 and 2029.
    • Many economists are concerned about the burden the swollen baby boomer generation will place on the economy as it retires.
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  • Audio

    Audio

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All debate about the future of German economic policy is currently under the spell of the refugee crisis.

It’s understandable that the small number of decisions being made right now are focused on short-term goals. But nobody should forget that Germany must succeed in its response to the crisis if it wants to guarantee the performance of its economy long-term.

The time has come to close Germany’s ever-growing investment gap. Only then can we ensure that job-seeking migrants, German natives and future generations have intact infrastructure and productive jobs.

Just over a decade ago, important changes were made to the German labor market. But back then politicians gave little thought to what was already an extremely low level of public and private investment.

This led to a dwindling of investment that endangers Germany’s suitability as a prime location for business. It isn’t the companies’ fault.

Politics has provided no regulatory framework to promote long-term competitiveness. The state has not invested enough in education or in creating a modern, high-performance infrastructure.

The refugee crisis makes it painfully obvious to everyone just how creaking Germany's education and welfare infrastructure has become.

Germany has one of the lowest shares of public investment among industrial nations. The share of overall public investment is declining steadily and today amounts to scarcely more than 2 percent of economic output. Our country is living off its reputation and is endangering its economic future.

The refugee crisis has been a wake-up call, because it makes it painfully obvious to everyone just how creaking Germany’s education and welfare infrastructure has become.

The call has been heard. However, the danger remains that as the cost of meeting the immediate crisis ramps up, large-scale, long-term investments will be considered even less possible. But that is precisely what Germany needs: a public and private investment offensive.

We can’t afford to allow the refugee crisis to mean even fewer state investments. It should instead mean a significant rise in investments, particularly in education and infrastructure.

Politics must improve both the quality as well as the breadth of the educational system if it is going to provide hundreds of thousands of refugee children and youths with necessary skills to gain a foothold in the labor market and in society.

The same is true for many Germans and the migrants already here. There are still too many people in Germany stuck in long-term unemployment without having completed academic or vocational training.

German leaders must lay down better ground rules for private investment so that the required educational and vocational opportunities are freed up. A moderate tax system would be a start, or a dependable regulatory policy and a high-performing public infrastructure.

Concrete proposals along those lines have been supported by an expert commission for “Strengthening Investments in Germany” as well as by other scientific committees.

The need for public investment is set to put a huge burden on the state in the coming years and decades. We can’t let this make us stray from our dependable financial policies and lead to higher state debts.

In any case, the pension claims of German baby-boomers who are now around 50 and will be filing for their pensions in around 15 years, excessive demands are already set to be placed on future generations.

Current budget surpluses are not only the results of disciplined financial policy. They’re much more due to temporarily-low interest rates and current unemployment lows.

There’s no reason to assume either of those things will last forever. Not to mention that budget surpluses are also partly down to the state investing less in public infrastructure.

We must change the way we structure the state budget without allowing the tax burden to rise. We think it would be best to repeal last year’s pension reform, which lowered the retirement age for some and which isn’t sustainable in the long-term. It exists at the expense of the majority, especially younger generations.

We should aim for a more flexible pension system and continue efforts further to raise the retirement age. That would mean substantial savings for the state, freeing up funds to be invested in the education system and public infrastructure.

That would preserve and create jobs for both Germans and refugees. Necessary vocational training can for the most part be done by older colleagues. Raising the retirement age would be an investment in the young generation of persons who are already here or are newly arriving in our country.

The move would also be the best contribution to guaranteeing the pensions of the older generation. Without a dynamic, high-performing economy, all pension promises are nothing but smoke and mirrors.

The federal government must react to the wake-up call of the refugee crisis and change course in its financial policy. We urgently need a massive shift of consumption outlays toward more public investments in education and infrastructure.

The first step must be a repeal of the pension reform, which Germany cannot afford and which weakens economic performance.

Only in this way can a solid financial policy be combined over the long run with a stable system of social security and a high degree of economic competitiveness.

 

To contact the authors: gastautor@handelsblatt.com

 

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