The independent Economic Expert Council advising the German government has warned that by 2040 contributions will make up nearly half of an employee’s wages, compared to the current approximately 42%.
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“That’s too much,” Council Chair Monika Schnitzer said at a press conference in Berlin. “Pressure to take action is rapidly increasing. This means lower net wages, lower consumer spending, less motivation to work, rising business costs. This harms the economy.”
Since 2005, healthcare costs have grown faster than contributions, and expenses for pensioner care have sharply increased since 2017. Costs are expected to continue rising as the population ages, older workers retire, and birth rates remain low.
The government led by Chancellor Friedrich Merz has promised potentially painful reforms to pensions, healthcare, and elderly care to reduce expenses.
At the press conference, Council expert Martin Werding accused the government of avoiding difficult decisions, recalling Merz’s promise last year of an “autumn of reforms.”
“The good news is that autumn comes every year,” Werding said. “The autumn of reforms may be near. We just haven’t seen that many reforms so far.”
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Berlin must ensure that elderly care is provided only to those who truly need it, Schnitzer said, urging mandatory savings for old-age care so future taxpayers do not have to cover these costs.
“In the best years, we greatly expanded the system and significantly exceeded the initial target,” she said. “Now we not only have to address the problem of demographic aging but also correct past mistakes when we were too generous.”
The Council also lowered this year’s German economic growth forecast from 0.9% predicted in November to 0.5% due to increased oil and gas prices related to the war in the Middle East and the effective closure of the Strait of Hormuz.
The German economy has barely grown in recent years, as it was hit hard by increased energy costs following Russia’s war in Ukraine and growing competition from China in key export industries.
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