German Pension Reform (2014)

Most Germans would tell you....that pension reform is a everlasting topic at the Bundestag.  Year after year....there's talk of pension reform, with various bells, whistles, and gimmicks.  Some are designed to be chatted about....some get serious consideration before folks know the price tag....and some actually make it all the way to completion.

So, this week....the newest German pension reform package was put up for consideration.  The Bundestag will chat about it, and see what support can be found.

The pieces?

First, there's the issue of the two classes of German mothers.  For some odd reason around two decades ago....the Germans decided to reward mothers (new mothers) extra time as a bonus for being mothers.  This deal was tied to a woman who worked....took time off.....then returned.  These women were all peppy and happy over the change.  The mothers who came prior to this date?  No bonus time.  You can guess the indignation and hostile feelings that brewed over the past decade.

So, this part of the reform....would bring the 'old mothers' up into the stage of the 'new mothers', and everyone would be equal.  Naturally....all women like this idea.  Naturally, the budget guys at the Bundestag hate this deal because of added cost.

Second, the retirement gate for full pension would be set up for forty-five years of contribution.  This means....if you did start working at 16 (like a fair number of Germans do)....then you'd retire at age 61.  You can imagine the guys sitting around and suddenly realizing that they did start early in life, and now?  Man, you could be fully retired and guzzling Becks beer in the backyard in a year or two.

Naturally, the older folks in Germany are really peppy over this idea, and think its great.  The budget guys?  They hate it.

Third.  There's a piece to the package which would address some perceived unfairness over medical retirement and likely increase it by some percentage.  This feature is the least talked-about element of reform.  Under the present system.....if you got into a serious accident, and were never able to work again....your pension would kick in....but it just wouldn't be as great if you had made it to sixty-five years old.  Almost everyone agrees....this needs reform badly.  Again, the budget folks hate it.

Total cost of this new package on top of the present package?  It's around 160 billion Euro to pay for it from now to 2030.

While everyone thinks the reforms would be great....especially the journalists talking up the deal.....there's this odd factor of taxes.  You'd have to invent taxes to  cover 2014 to 2030....that takes 160 billion Euro out of public's hands.  Yeah, they'd spend the money as they retired.....but you'd have to take a Euro here, and ten Euro there....to reach the extra money required.

The chances of this passing?  Well....there's some issues.  First, Europeans have been listening to Merkel talk austerity for the past four years.  This reform is anything BUT austerity.  So most other countries will hate it.  Germans?  They'd love the idea of being retired at age 62.  The older mothers would love getting their deal as the same for new mothers.

I suspect it'll pass.  And in five years....Germans will be grumbling to a major level....over new taxes invented out of thin air.  Hostile and angry?  Well....yeah.  But that's nothing new in Germany.