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Merkel identifies pension reform as top government priority

Staff Writer | August 21, 2018
German Chancellor Angela Merkel (CDU) has identified far-reaching reforms of Germany's public pension system as key policy priority of her coalition government.
Angela Merkel
Germany   The 2020s will be critical for the German social insurance system
Speaking to press in Berlin, Merkel's official spokesperson Steffen Seibert said that her goal was to ensure social security for all generations in the period both until and beyond 2025.

The comments were made in response to a widely-publicized call by Finance Minister Olaf Scholz (SPD) for the government to stabilize pensions until 2040 with a corresponding financing model.

The ruling Christian Democratic Union (CDU), Christian Social Union (CSU) and German Social Democrats (SPD) have made a pledge in their coalition agreement to guarantee citizens a pension level equivalent to 48 percent of their current income until 2025.

The parties hereby left open how to approach challenges posed by Germany's ageing society in this regard after the cut of date and said that they would appoint an expert commission to explore policy options for the longer-term.

Scholz has described a successful overhaul of the German pensions system as being critical to alleviate citizens' concerns about socio-economic inequality and hence prevent the rise to power of a populist politician like U.S. President Donald Trump in the country.

A spokesperson for Scholz reiterated on Monday that the "clear goal" of the debate he had provoked on pensions was to nip "populist tendencies" in electoral competition in the bud.

In spite of highlighting the priority which Merkel attaches to the issue, her spokesperson Seibert noted on Monday that the chancellor would not intervene with the work of the independent expert commission.

Seibert noted that the 2020s in particular would become a critical period for the German social insurance system when a large number of citizens from the so-called post-war baby boomer generation are expected to retire.

Merkel's public statement on pensions underscores growing concern in Germany about the fiscal and economic consequences of demographic change.

A recent study by the Bertelsmann Foundation found that nearly two thirds (65 percent) of Germans associate risks with an ageing population for themselves, including falling into old-age poverty, having to work longer and a need to pay higher salary contributions towards pension schemes.

"The survey clearly shows that citizens experience demographic change as a significant and far-reaching trend which will significantly influence the future of Germany," Bertelsmann demography expert Andre Schleiter explained.

Schleiter further highlighted that a failure to successfully manage demographic change was likely to result in an increase of social inequality in Germany.

Whereas policymakers and business representatives still regularly pointed to asylum seekers as a potential solution to severe labor shortages and low birth rates during the 2015 "refugee crisis", increasingly hostile attitudes on foreigners and the electoral rise of the Alternative for Germany (AfD) have since led Merkel to shift to a more restrictive stance on migration.

Instead, Berlin now places a greater emphasis on measures designed to encourage natives to have more children, such as expanding the availability of public childcare facilities.