German economic body sees 'summer of reforms' with pensions overhaul

A government-approved plan to reform Germany's pension system may signal a new political beginning for the troubled ruling coalition, according to the country's Council of Economic Experts.

If the coalition, which comprises the conservative CDU/CSU bloc and the centre-left Social Democrats (SPD), effects the extensive changes to health and long-term care insurance, this could "truly become a summer of reforms," council chairwoman Monika Schnitzer said in comments published on Saturday by the Funke Media Group.

A government-appointed commission has presented a comprehensive plan with 33 proposals to overhaul the current pension system.

With the coalition seeking ways to stabilize funding undercut by a rapidly ageing population, Chancellor Friedrich Merz, who also leads the CDU, said this week that the plan will be fully implemented.

Labour Minister and SPD co-leader Bärbel Bas has also signalled the proposals would all be applied, despite criticism from unions and employer representatives after the commission's report was leaked last weekend.

According to Schnitzer, it is now crucial to have the courage to undertake further reforms and not allow the process to be held back by special interest groups.

A successful reform agenda could also strengthen trust in politics, she said.

"Many people have the impression that the state is no longer capable of acting," she said. If major reform projects can be implemented, it will show "that politics is still capable of solving major problems."

Reform sprint in summer heat

The leaders of the CDU/CSU and SPD plan to discuss further reforms in the coalition committee on Wednesday.

Steffen Bilger, the first secretary of the CDU/CSU parliamentary group, told the Rheinische Post newspaper that despite the sweltering temperatures, the coalition is "switching into sprint mode once again. We want to advance and complete important reforms."

The health-care reform is already in its final stages in the Bundestag, the lower house of parliament, according to Bilger. Regarding pensions, "the commission has put forward good proposals that now need to be implemented quickly."

Tax relief, especially for low and middle incomes, will be a topic in the coalition committee, he said. "This coalition is bringing the major reforms to fruition step by step and can look back on six months of groundbreaking decisions."

The reform plans envisage changes across all generations. The commission, made up of 13 experts and politicians, aimed to ensure that retirees receive 70% of their last net salary in the long term, on a mix from state, occupational and private pensions.

The number of Germany's pensioners is expected to rise significantly in the coming years with the post-war Baby Boomer generation having begun to retire.

Meanwhile, the number of workers paying into the system is not expected to rise at the same level, which could lead to significantly higher contributions.

Under the plans, the legal pensionable age, which is set to rise to 67 by 2031, should be increased by six months over the next decades in line with growing life expectancy.

The minimum pensionable age is also to be raised to 64, according to the commission.

To date, many people have made use of the option of taking a reduced pension at 63 after 35 years of contributions.

This point is separate from taking the state pension at 63 after 45 years of contributions without reduction, which the report recommends abolishing.