Sunday

27th May 2018

German bank highlights EU pensions problem

  • Berlin: SPD has promised pensions top-ups ahead of next year's elections (Photo: Sascha Kohlmann)

German people who enter the labour market today will have to work until they are 69 if they want the same level of pensions as their predecessors, the German central bank has said.

The Bundesbank, in a report out on Monday (15 August), noted that the state would not be able to keep payouts at current levels of 43 percent of average income after 2050 unless the retirement age went up or pensions contributions increased.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The retirement age is in any case due to rise from 65 to 67 by 2030, but the bank said this should go up again to 69 at some stage before 2060.

"Further changes are unavoidable to secure the financial sustainability [of the pension system]”, it said. “Overall, there is evidence that a longer working life and a higher statutory retirement age should be given more consideration.”

It added that the option of higher premiums would harm economic growth and quality of life.

Higher premiums “raise the strain on those paying the contributions, and an increasing, high burden of payments overall has negative consequences on economic development”, the bank said.

Pensions are set to be a big issue in federal elections next year because older voters tend to turn out in higher numbers than young people.

The centre-left SPD party has already promised to top-up the lowest pensions, putting chancellor Angela Merkel under pressure.

But Merkel’s spokesman, Steffen Seibert, ruled out any policy change for the time being.

"Retirement at 67 is a sensible and necessary measure given the demographic development in Germany. That's why we will implement it as we agreed - step by step,” he told journalists on Monday.

“There are always discussions and sometimes the Bundesbank also takes part in such discussions.”

The bank report linked the problem to “demographic changes”.

It noted that the generation of people born shortly after World War II was now retiring and that life expectancy was higher, but at the same time birth rates were lower than in the post-WWII surge meaning that workers’ contributions to state coffers were failing to keep up.

The issues affecting the eurozone’s largest economy are also reflected elsewhere in the bloc.

According to European Commission statistics, Germany has the second highest proportion of people aged 65 or over (21 percent) after Italy (21.7 percent).

Many of the wealthy countries in western Europe have similar levels.

Poland, by contrast, has just 15 percent, while Turkey, which is still slated to one day join the EU, has just 8 percent of people aged 65 or more.

Debt relief talks mar Greek bailout exit

While the Greek government has committed to fulfill the last creditors' requirements in the coming month, Europeans and the International Monetary Fund are still far from an agreement on measures to reduce the country's debt in the future.

EU pessimistic on permanent US trade exemption

EU trade chief said the US will impose tariffs or "other limiting measures" on 1 June, as the EU's offer to start limited trade talks is probably not enough for the protectionist Trump presidency.

Analysis

EU has no 'magic bullet' against US Iran sanctions

EU leaders in Sofia will discuss how they can protect the bloc's economic interests against US threats to sanction companies doing business in Iran. But their options are limited.

Opinion

EU budget must not fortify Europe at expense of peace

Given the European Commission new budget's heavy focus on migration, border management and security, many are asking whether the proposal will fortify Europe at the expense of its peace commitments.

News in Brief

  1. Italy set to pick eurosceptic finance minister
  2. UK foreign minister fooled by Russian pranksters
  3. Rajoy ally gets 33 years in jail for corruption
  4. Close race as polls open in Irish abortion referendum
  5. Gazprom accepts EU conditions on gas supplies
  6. Facebook tells MEPs: non-users are not profiled
  7. Commission proposes ending France deficit procedure
  8. UK households hit with Brexit income loss

Stakeholders' Highlights

  1. Counter BalanceEuropean Ombudsman requests more lending transparency from European Investment Bank
  2. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  3. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  4. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  5. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  6. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  7. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  8. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  9. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  10. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  11. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  12. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach