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Germany proposes pension freeze

GERMANY – Chancellor Gerhard Schroeder says it’s the hardest thing his government has done – freezing pensions for 2004.

"Yesterday we made the most difficult decision I have had to make as a minister,” Schroeder said, admitting that the move amounts to a cut in real benefits for pensioners.

The proposal is designed to help a deficit estimated at eight billion euros in state pay-as-you-go pension funds. The proposal, which will now be submitted to parliament for final approval, faces strong opposition.

Schroeder said: “If we don't start to address the demographic challenges decisively and with determination it will be too late when we do face this extreme change in our society in the coming years."

Social security minister Ulla Schmidt said that it was common knowledge that Germany’s old age pension insurance in depends too much on business fluctuations.

“In view of the enormous holes in the pension scheme the Federal Government intends now to place for the first time in the history of the Federal Republic the financial self-sufficiency of the legal old age pension insurance in question,” said opposition CDU/CSU spokesman Andreas Storm in a statement.

He called it “irresponsible”. He said he suspects the government is preparing the ground to dismantle the existing pension system.

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