The central bank of Germany has re-started a severe debate that has been raging under the surface of Europe’s largest economy. The German population is an aging one, and the bank is now calling for retirement to be raised to 69. The lines have already been drawn, with economic analysts backing the idea and politicians, with an eye on forthcoming elections, coming out in opposition.
Vice-chancellor and Economy Minister, Sigmar Gabriel was one of the first voices of dissent. He called the idea ‘nuts,’ and said that average German workers would think so as well. The idea that has offended so many people was released as just one passage in the Bundesbank report. The report highlighted the fact that even though the economy and public pension figures were satisfactory, changes like retirement had to be carefully examined. The bank stated that it was essential for stability in the future of German Pensions that a framework is set up to increase the age gradually. The aim is to make it 69, by 2060.
Life expectancy in Germany is 83 for women and 78 for men at the moment, and this is continuing to go up with medical advances. The state of the nation at present means that even if Germans delay the age they claim their pension, they usually leave employment when they are 62. Because of this, about 20 years of pension shortfall will need to be financed, as the working population gets smaller and pensioners become a bigger group in the overall population.
The age 69 has been bandied around by banking financial experts since 2009. It has been highlighted again recently as an attempt by the bank to ‘contribute to the debate’ and try to get the German political elite to take a longer term view of the economy. It is expected that the whole issue of pensions and retirement will be a hard fought point by all of the main political parties. There are around 20 million retirees who are eligible to vote, so politicians will be hoping to get them onboard by debating a range of topics from, future pensions, to pension equalising payments between West and East Germany. These are major debating topics and politicians know that they cannot expect to win by telling the population that they have to work longer than they do now.
The Social Democrats under Gabriel have already massively rejected any idea of rising retirement at all. The same can be said for the already under pressure Christian Democrats under Angela Merkel. The pension topic here is so sensitive that the debate has not even been raised. The party secretary has already stressed that 67 in the correct age.
At the other side of the spectrum, the economists not only backed the Bundesbank, but some even think that the figure should be higher. An economic think tank from Cologne stated that current levels could only be maintained if the retirement age went up to 73.
An economist at the Max Planck Institute, Axel Boersch-Supan, said that the retirement age should be linked to life expectancy. He also criticised the ‘fear’ that all German politicians had when it came to long-term pension planning, as the people affected would only be turning 20 at this moment.
The retirement issue is making a lot of people very uneasy in Germany, especially when linked with low-interest rates, which have seen long-term savings suffer because of the European Central Bank’s anti-saving expansionist policies.
The fact that the raising of the pension age is seen even by supporters as just the least damaging solution says it all about the German and European post ‘Euro ‘ economies.