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Pensions

Labor Minister Andrea Nahles unveils pension plans, sets Merkel collision course

Germany's new Social Democrat labor minister has presented some pricey plans for pensions in the coming years - with one provision in particular likely to irk Chancellor Angela Merkel.

Barely a month after taking office, Andrea Nahles presented her new proposals for German pension policy on Thursday. Labor Ministry estimates suggest that the changes would cost an extra 4.4 billion euros ($6 billion) this year, and a total of about 160 billion euros by 2030.

Both parties in Germany's new government had agreed on the most fundamental change, a key Social Democrat demand in the grand coalition negotiation process. This would allow people to take early retirement and a full state pension at 63 - if they had been working for 45 years or more, since age 18. The legal retirement age in Germany is 67, although most people stop work slightly earlier and take a reduced state pension.

One part of Nahles' package appeared to directly contradict a condition on pension reform set by Chancellor Angela Merkel. Nahles' proposals would allow people to count all periods of short-term unemployment within their 45-year period of work. Merkel had previously said that these periods of time between jobs should not total more than five years.

"It's simply a lack of discipline from Labor Minister Nahles not to have paid attention to this clear guideline from the chancellor when drawing up the draft law," the CDU's Christian von Stetten said in the Bundestag.

Time spent on Germany's long-term unemployment benefit system, known as Hartz IV, will not be counted into an individual's 45 years.

More for Mums

Another key change within Nahles' pension proposals originally hailed from Merkel's Christian conservatives: Mothers whose children were born before 1992 will qualify for 28 euros more per child, per month. Women in former Eastern German states, where living costs are still lower, will receive 26 euros extra. This provision is expected to affect 9.1 million German women.

Despite concerns over future financing as Germany's population ages, the Labor Ministry has said the pension reforms could be funded until 2018 purely by dipping into the country's current pension reserves of about 31 billion euros. Yet this compromise proposal, allowing Merkel to stick to her "no tax increases" campaign pledge during the current term, has not satisfied the opposition.

"What haystack are you planning to turn into gold to eventually be able to pay for all this?" asked Green party chairwoman Katrin Göring-Eckhardt during Thursday's Bundestag debate. "You're plundering the pension fund, and then, starting in 2019, people's payments and taxes will rise."

Germany's Confederation of Trade Unions (DGB) umbrella group welcomed the chance for earlier retirement, saying anyone who had paid into the state pension fund for 45 years should have "a right to leave." A major employers' confederation, Gesamtmetall, countered: "This is money that we could invest more wisely in our education system, in our infrastructure, or in paying off our national debt."

Nahles was always among the most intriguing appointments in the new grand coalition Cabinet, as the junior partners named a left-leaning senior Social Democrat as labor minister. CDU politicians Franz Josef Jung and then Ursula von der Leyen, now defense minister, had presided over Germany's wealthiest ministry during the previous term, when Merkel's conservatives allied with the pro-business Free Democrats.

msh/jr (dpa, Reuters)

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