Pension Reform

A Ticking Time Bomb

  • Why it matters

    Why it matters

    Pension increases implemented and promised by Chancellor Angela Merkel’s coalition could entail higher-than-expected cost rises and boost labor costs.

  • Facts


    • A new study seen by Handelsblatt shows the cost of the German government’s 2014 pension reform could be far greater than officially forecast.
    • The Cologne Institute for Economic Research estimates that a rise in pensions for mothers alone could cost contributors — employees and companies — more than €106 billion by 2030.
    • Further pension increases have been promised, for example an increase in eastern German pensions to western German levels by 2025.
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Germany is facing a looming pensions burden following reforms from 2014. Source: DPA

Germany’s ruling coalition of conservatives and center-left Social Democrats has placed a time bomb in Germany’s welfare system with generous pension increases that could cost the economy dearly.

Research seen by Handelsblatt indicates that the costs of a pension reform introduced in 2014 will exceed €100 billion, or $107 billion, in the years 2018 through 2030 — and political parties are lining up to promise further hikes in the campaign running up to the September general election.

Chancellor Angela Merkel’s government has been criticized for resting on the laurels of buoyant economic growth and failing to enact necessary cost-cutting reforms to equip Germany’s ageing society for coming costs.

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