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Reforms

German pension plans prompt EU reply

The German government has announced the lowering of retirement age to 63 in certain cases. Not everyone's happy about that. Experts are criticizing the step as irresponsible.

Rising life expectancies and demographic change means industrial nations will have more and more old people wandering the streets in the next decades - and fewer young people to pay for seniors' pensions. One solution to this dilemma: raising the retirement age.

That's what Germany's EU Commissioner Günther Oettinger has suggested.

"We have to talk about 70 as the new retirement age," Oettinger told German newspaper Die Welt.

"We have to prepare people for a longer working life."

Higher life expectancy - same retirement age

One issue Oettinger cites for his proposal is a lack of qualified workers in jobs like engineering. But life expectancy also plays an important role in the argument to raise retirement ages.

David Blake, director of the Pensions Institute at Cass Business School in London, has been researching pension policies for three decades.

"Life expectancy has been increasing by roughly 2.5 years per decade in countries in the European Union for the last 150 years," Blake told DW. "Retirement age has been roughly the same, 65, since the late 1940s in many countries in northern Europe. But during that time, people's life expectancy has gone up by 10 or 12 years."

Assuming that, in light of generational fairness, each generation should spend the same proportion of adult life working, retirement age has to go up, the economist argues.

Germany rolls back the clock

Mother with baby (photo: imago/imagebroker)

The German government wants to retroactively raise pension payments for mothers

The government in Germany, however, seems to disagree.

Conservatives and Social Democrats (SPD) in Angela Merkel's governing coalition have decided to actually bring retirement age down - from 65 to 63 years - if a person has been paying into the employees' state pension fund for 45 years.

The SPD, under labor minister Andrea Nahles, has been especially ardent in trying to achieve this goal. They are, after all, considered the German party closest to laborers and employees.

Their proposals are in addition to those from conservatives (CDU/CSU), who want to increase pensions for mothers whose children were born before 1992. Current pension rules, they said, penalize older mothers.

Financially, Germany is doing well, the thinking goes, so why not use it to reform the pension system?

No retirement union

Because it's the wrong kind of reform, according to Sven Giegold. The economic spokesman for the Green Party in EU parliament is more worried about the amount of pension money seniors receive than the age they enter retirement.

Sven Giegold, member of the European Parliament (photo: M. Banchón)

Sven Giegold from the Greens: The plans don't fix the problem of retirees living in poverty

"The most pressing problem is that more and more retirees live in poverty," Giegold said to DW. Simply lowering the retirement age won't change that, and neither would raising it to 70, according to the Green politician.

What Giegold is most upset about, however, is the fact that EU Commissioner Oettinger got involved at all.

"Germany's pensions policy is none of the European Commission's business," he said, adding that Oettinger, as energy commissioner, shouldn't publicly talk about retirement issues at all.

Pensions are indeed a completely national matter, so they differ widely from one EU member state to the next. In 2009, the most recent year for which comprehensive data is available, the retirement age for women in Slovakia was 57.5 years. At the other end of the scale is Sweden, where some workers can only retire at the age of 67.

Social responsibility

Even though some EU parliamentarians have voiced their support for the retiring-at-70 idea, they can't do much about it.

British conomist David Blake believes that won't stop the EU, though.

"They're trying to get more of a say in anything," Blake told DW. "But the problem with pensions is it's so country-specific. It's built around the social practices of these countries historically."

What's important, is keeping a fair balance between providing for people in old age and not over-burdening the young generation, Blake emphasizes. He worries that lowering the retirement age like Germany is in the process of doing could inspire neighboring nations to do the same. That fear is shared by Oettinger.

With the shifting demographic balance, that would leave fewer young people to pay for more retirement years of the older generation.

According to Blake, "Reducing the retirement age to 63 is socially irresponsible."

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