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22 February 2014

Commission and Germany disagree over pension reform

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Referring to Germany's plans to lower the retirement age for some people to 63, VP Rehn said that he could not think of any convincing economic arguments for turning back pension reforms. He also hinted he would not rule out taking action against Germany on the issue in the future.

Translated from the German

In an interview with the print edition of the Wirtschaftswoche, EU Economic Affairs Commissioner Olli Rehn said of Germany’s plans to lower the retirement age to 63 for workers who have contributed to the system for 45 years, "I cannot think of any convincing economic arguments for turning back pension reforms – especially in the light of a heavily ageing society". The online edition of the Wirtschaftswoche reported that he hinted in an interview with Business Week that Germany might face proceedings by the European Commission. "This could well be the case", Rehn said. "However, it is still too early to make a definitive statement." He is quoted by the Frankfurter Allgemeine Zeitung, predicting: "The German pension reform will have a negative impact on the sustainability of public finances".

In Germany, there is now a fear of an early retirement wave. The changes will cost billions of euros in the coming years, according to various estimates, among them the Federal Employment Agency. The bill for theses measures will have to be stemmed by employees and employers; the government refrains from a reduction in the contribution rate and also uses the reserves of pension plans. In addition, the federal government will gradually contribute to the costs, eventually using an annual €2 billion in tax money to sustain the pensions.


The Frankfurter Allgemeine Zeitung reports that the SPD and the Left Party have expressed their outrage at the Commission's criticism. "This is a good example for something that the EU Commission should not regulate", said the SPD General Secretary Yasmin Fahimi. She stressed that the German government wanted to "close a justice gap" with the earlier possible unreduced pension demands. More drastic words came from the deputy leader of the Left Party, Sahra Wagenknecht: "The EU Commission should mind its own business". She advised Rehn instead to look into taxation for millionaires, "if he cares about the German government finances". 

However, FDP politician Volker Wissing said that the federal government should take Rehn's warnings seriously. Equally, the German economy has a very critical view of the new pension regulation.

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