German Chancellor Friedrich Merz's pension reform is facing growing resistance both within the governing coalition and among the public, with a recent ZDF poll finding that 74% of respondents oppose abolishing penalty-free early retirement for people who have contributed for 45 years. The survey also found that 83% consider a fundamental reform to stabilize pensions important or very important.
The contested measure would remove the option to retire two years before the statutory retirement age without deductions after 45 years of contributions. It is popularly known as 'retirement at 63' because the ordinary retirement age was 65 when the early retirement option was introduced. The change is one of 33 recommendations presented to the German government in June by a commission of experts. Merz and his coalition partners, the CSU and the Social Democrats (SPD), said at the time that they wanted to turn all the recommendations into a legislative package to make the pension system economically sustainable.
Since the plans became known, discontent has grown, especially within the SPD. The conservatives' setback in several regional elections in September, including falling below 5% in Mecklenburg-Western Pomerania and being left out of a regional parliament for the first time in their history, was seen as a rejection of the government's plans by voters.
The government has been working on the reform since June, but the plans have been repeatedly delayed. Labour Minister Bärbel Bas announced her resignation unexpectedly in mid-October. The pension reform was the main criticism against Bas, who was accused of missing important meetings and slowing the process. At the time, her stepdaughter was on her deathbed, and at least the top leaders of the governing parties were aware. Bas ultimately resigned because of the death in her family. In her resignation letter, she criticized personal attacks from conservative politicians, which again brought friction between the coalition partners.
Despite the setbacks, Merz expects the new labour minister, Alexander Schweitzer, to accelerate the reforms. He aims for the cabinet to approve the bill before the end of this year and for the Bundestag to pass it in the first quarter of 2027, according to remarks he made at the Entrepreneurs' Day organized by the BDA industry association. Merz defended ending early retirement without cuts as a question of justice. 'Retiring earlier, without cuts, while healthy and fit, is not fair. Neither pension insurance nor our economy can afford it, if fewer and fewer workers have to finance a growing number of retirees,' he said.
The SPD had justified retirement at 63 before its introduction in 2014 by arguing that it was aimed at professions with high physical demands and cited roofers as an example. The government now argues that many more people make use of the rule and that most are higher earners who can afford to retire early.
The DGB pension commission, however, sees the issue differently and last week presented a final report with alternative proposals to those set by the government's expert committee. Yasmin Fahimi, president of the German Trade Union Confederation (DGB), acknowledged at a press conference in Berlin that Germany faces a major demographic challenge, including low birth rates, an aging society and the retirement of the baby boomers, as well as fewer workers contributing for each pensioner. But she made clear that 'responding to them with pension cuts is a mistake.' In her view, what really matters is that as many people as possible remain in the labor market for as long as possible, have good incomes and therefore contribute more to the mandatory pension insurance system.
Fahimi said more people who currently do not contribute should pay into the mandatory pension system, and called for the pension to become more strongly linked to employment through the gradual inclusion of the self-employed. She also said more fiscal resources are needed and advocated additional taxes on large fortunes to guarantee a standard of living of at least 70% of the average net income level. She criticized what she described as totally exaggerated figures on the costs of retirement at 63 and said the debate sends a wrong signal to young people, because it matters that a young person knows that entering the labor market 10 years earlier will bring a real long-term benefit. She urged the government to re-examine in full which measures it actually wants to implement.
Frank Nullmeier, a professor of political science at the University of Bremen and one of the experts involved in producing the expert commission's report, said that while demography is fundamental, it 'only determines pension policy insofar as it modifies the labor market.' He recalled that the economy and the labor market situation make the difference. 'We simply need many workers for the pension insurance system to be sustainable. We have to reduce the obstacles that prevent greater participation in the labor market,' he said. On that basis, the DGB commission proposes not only including the self-employed but also adding members of parliament to the public pension system. MPs have a specific system financed with public funds. Civil servants also have their own system, but including them would require a constitutional change, which all the experts consider too complicated.
Sources: El País Economía.