11/28/2013 03:13 PM
World from Berlin
Germany’s next government is expected to shower the country with goodies including a minimum wage and an earlier retirement age. Editorialists warn the extra spending sends the wrong message and will be costly for the next generation.
Germany’s conservatives and left-leaning Social Democrats reached an agreement this week to create the next federal government after weeks of negotiations following the Sept. 22 election. With Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) at its helm, the coalition government has agreed to a number of joint policy initiatives that will see the establishment of Germany’s first-ever legally mandated minimum wage and generous changes to the country’s pension system, including the option of retirement at 63. At the same time, the CDU, its Bavarian sister party, the Christian Social Union (CSU) and the center-left Social Democratic Party (SPD) are pledging to deliver these gifts without raising taxes.
Christoph Schmidt, the head of the German Council of Economic Experts, which advises the German government, said he doesn’t believe the government has the funding for all the gifts being given to voters. “It may be possible to finance the planned extra spending until 2017 without raising taxes or fresh borrowing, but it won’t be possible after that,” he told the newspaper Die Welt.
Schmidt said the plans for allowing retirement at 63 instead of the current 67, along with additional benefits for women who left work to raise children and other pension perks would create lasting additional expenditures. Ultimately, he warned, the money would have to come from either higher individual pension contributions, higher taxes or through a general reduction of pension benefits.
Meanwhile, Clemens Fuest, director of the European Center for Economic Research (ZEW), warned of both the pension changes and the new minimum wage. “The biggest problem is the combination of stricter labor market regulations, the sinking of the retirement age and the introduction of new retirement benefits,” he said. “That’s going to drive up social security contributions and reduce employment at a time when we actually need more jobs.”
German Finance Minister Wolfgang Schäuble of Merkel’s CDU has defended the proposals, saying everything has been calculated solidly. He told a German public broadcaster there would be €23.06 billion in additional spending between 2014 and 2017 and there is plenty of room for maneuver in the current budget. He said his ministry is already anticipating budget surpluses of €15 billion a year during that period.
The coalition agreement dominates the coverage of German newspapers, where editorialists at many papers criticize the planned new spending, which they believe sends a bad message in times of European austerity. Others praise the new worker protections planned by the future government.