Imagine working your entire life, paying into a system that promised security in old age, only to realize the promise might not survive another decade. That’s the quiet panic starting to spread across Germany right now.
The numbers are brutal. More than 21 million people now draw a state pension. The workforce that funds them is shrinking fast. Last year the pension fund already slipped into the red by €2 billion; this year the hole could reach €7 billion. And that’s before we even talk about the new “reform” package the government wants to push through.
A Cry of Alarm from Germany’s Top Economists
On a quiet Monday morning, twenty-two of the country’s most respected economists and pension experts dropped a bombshell. Their message was short and crystal clear: take the current pension package off the table – immediately.
“For stability, reliability, and trust, we need long-term pension policy that is predictable and fiscally sustainable.”
Joint statement of the 22 economists
They didn’t mince words. The proposed measures – an “active pension” that lets retirees earn extra money tax-free, further expansion of mothers’ pensions, and a politically enforced minimum pension level – would add another €10–15 billion per year to an already overstretched federal budget. In a country sliding into recession, that’s simply reckless.
Why This Package Feels More Like Election Bribery
Let’s be honest. With approval ratings in free fall and a far-right party gaining ground, the timing looks suspiciously convenient. Handing out new benefits to older voters just months before crucial regional elections? It’s hard not to see the political calculus.
The economists called it exactly what it is: short-term vote-buying dressed up as social policy. Meanwhile, the bill gets sent to younger workers through higher contributions and taxes. In my view, that’s not just bad economics – it’s a breach of the intergenerational contract that has kept Germany stable for decades.
The Demographic Math Nobody Wants to Face
Back in 1965, five workers supported every retiree. Today the ratio is barely two-to-one, and it’s heading toward one-to-one in many regions. That’s not an opinion; it’s arithmetic.
- Birth rates remain stubbornly low
- Life expectancy keeps climbing
- Immigration, often portrayed as the solution, mostly adds to the benefit side rather than the contribution side in the first years
- The result: a classic pay-as-you-go system slowly turning into a pyramid scheme
Every year the imbalance grows worse. And instead of adapting retirement age, encouraging private savings, or building genuine second and third pillars, politicians keep piling on new benefits that have nothing to do with actual contributions.
The Hidden Costs That Never Make the Headlines
Here’s something you rarely read in the mainstream press: a large and growing chunk of pension spending now goes to people who never paid a single euro into the system. Credits for childcare, university years, unemployment periods – fair enough in many cases. But when benefits are extended far beyond actual contributions, the insurance principle collapses.
Worse, some payments go to recipients whose legal status is, let’s say, complicated. The system was never designed for that. Yet every new exception gets baked in permanently, and the deficit quietly explodes.
What Realistic Reform Would Actually Look Like
The economists aren’t heartless number-crunchers asking to throw grannies out on the street. They simply want a system that can survive the next thirty years. Some of the ideas floating around make a lot of sense if you can look past the short-term pain:
- Gradually raising the retirement age in line with life expectancy (Sweden already does this successfully)
- Real tax incentives for private and occupational pensions instead of endless new state promises
- Linking benefits more closely to actual lifetime contributions
- Creating a proper demographic reserve fund during good years (yes, Germany once had one)
None of these steps are popular. All of them are necessary.
The Swedish Example Everyone Quietly Envies
Look north. Sweden went through its own pension crisis in the 1990s and bit the bullet. They introduced automatic stabilizers: when life expectancy rises, retirement age rises. When the economy or demographics worsen, benefits adjust slightly downward. The system is transparent, fair, and – most importantly – still solvent.
German politicians know this model works. They just don’t have the courage to propose it when elections are around the corner.
The Young Are Already Voting With Their Feet
Talk to any German under 35 and you’ll hear the same refrain: “I’ll never see a decent state pension anyway.” Many have simply stopped believing in the system. They put nothing aside because they expect everything to be eaten up by contributions for the older generation.
That’s a tragedy on multiple levels. A whole generation is neither building private wealth nor trusting the public system. The result? When they do reach retirement age, many will be poor – and the state will face even bigger problems than today.
Could This Be the Trigger for Broader Reform?
Sometimes it takes a loud wake-up call to force change. The open letter from these 22 economists might be exactly that. Even inside the conservative CDU/CSU, younger lawmakers are starting to rebel against their own leadership. They see the demographic tsunami coming and refuse to be the generation that pays for everyone else’s promises.
Perhaps – just perhaps – we’re finally reaching the point where reality can no longer be wished away with new borrowing or creative accounting tricks.
What Ordinary People Can Do Right Now
While politicians argue, individuals still have options. In my experience, the Germans who sleep best at night are those who stopped relying 100% on the state pension years ago.
Simple moves like maxing out tax-advantaged retirement accounts, owning a home that will be paid off by retirement, or building a diversified portfolio of dividend-paying assets can make an enormous difference. It’s not sexy, it’s not fast, but it works.
The state system will probably still be there in some form – but expecting it to maintain today’s replacement rates is, frankly, wishful thinking.
The Bottom Line
Germany stands at a crossroads. Keep kicking the can down the road with expensive giveaways and the pension system will eventually collapse under its own weight. Face the demographic reality now – with all the tough choices that entails – and the country can build something sustainable that treats both young and old fairly.
The 22 economists have done their part. They’ve delivered the warning in the clearest possible terms. The question now is whether Berlin has the political courage to listen before it’s too late.
Because when the money finally runs out, no amount of promises or finger-pointing will buy back the lost time.
