German economists have warned the government against watering down the recommendations of the Alterssicherungskommission to reform Germany’s first and second pension pillars.
In an appeal to the government, 46 economists, including German Council of Economic Experts chair Monika Schnitzer, pension commission co-chair Constanze Janda and Ifo Institute for Economic Research president Clemens Fuest, stressed the importance of implementing the recommendations as “a consistent package of measures”.
Changes to the retirement age, inclusion of additional groups in the statutory pension system and a mandatory capital-funded first-pillar element would have a “positive and stabilising effect” on the pension system only as part of the package, the economists said.
“The government should seize this opportunity rather than squander it,” they added.
If measures proposed by the pension commission are scrapped, the government must find an “effective alternative”, according to the appeal.
“Otherwise, the entire concept will collapse, and ever-growing problems will continue to be deferred at the expense of younger generations, already under increasing pressure,” the economists said.
The commission’s recommendations would make the German pension system more reliable and fiscally sustainable, according to the economists.
The proposed capital-funded element would involve an additional 2% contribution invested in capital markets. This would reduce the burden on public finances of funding statutory pensions, increase pension levels and dampen the long-term rise in contribution rates for the pay-as-you-go part of the system, they said.
The government is under pressure to review the commission’s reform package following disappointing results for coalition partners the Christian Democratic Union and Social Democratic Party in recent state elections in Saxony-Anhalt, Mecklenburg-Vorpommern and Berlin.
The government will present concrete proposals on the commission’s recommendations in the coming weeks, Peter Haan, head of the public economics department at DIW Berlin and one of the signatories of the appeal, told IPE.
“Calls to withdraw certain elements [of the recommendations] have arisen, partly due to the results of the state elections. Therefore, a discussion [on reforms] is particularly important at this time,” Haan said.
Forgoing one recommendation could trigger a domino effect, with “the high risk of further demands” to scale back reforms, he said.
