The equity market has underestimated what has already been decided on German pension reform, ABN Amro says.
“It may be too early to pass judgement on the success of pension reforms, but we believe that much has been accomplished and that the market still underestimates the extent of what has been decided,” said Rolf Elgeti, the bank’s head of European equity strategy.
“The groundwork for a more stable pension system has been created, the benefits of which will only become apparent over the coming years.”
Elgeti points out that the reduction in benefits “go way beyond what most other European countries have implemented.
“Nonetheless, public opposition to these changes has been minimal, compared with both the public outrage that was seen in response to Hartz IV labour_reform and the large demonstrations that marked the French pension reforms.”
Elgeti said that the pension reforms means the consumer foots the bill by accepting lower benefits and later retirement.
“This has, of course, the potential to delay the domestic demand recovery even further as disposable income may shrink before it recovers in Germany.”

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