Here’s the good news on the decisions the German government reached on pension reform last week: Compared to the other social reforms that were implemented during the current legislative period, they are not very costly.
For example, the planned improvements for those unable to work due to disability will come into force in small steps by 2024. After that, they will cost the pension fund €3 billion ($3.18 billion) per year.
The conservative-led coalition has also decided to further stretch out the adjustment of pensions in eastern German states to levels in the western region. The adjustment process was supposed to be completed by 2021 at the latest. But it will now be achieved between 2018 and 2025, at a total cost of up to €3.9 billion to be spread over those seven years.
“By that point, eastern Germans’ pensions should probably catch up with western Germans’ anyway,” said Joachim Ragnitz from the Ifo economic research institute, provided that wages in the east rise a little more than they do in the west in the future.