Economists’ Warning: Germany’s Costly Pension Package Must Be Scrapped Immediately

Submitted By Thomas Kolbe

Germany’s public pension system is under mounting pressure. Amid a deepening economic crisis, uncontrolled poverty migration, and a rapidly aging population, a shrinking workforce is being forced to shoulder an ever-growing burden. Meanwhile, the number of pension recipients continues to rise and has now smashed through the 21-million mark.

The widening deficit in the pension fund — and the surging federal subsidies needed to stabilize it — shows the system is slipping out of control. Political pressure for reform is intensifying, yet Berlin offers nothing but costly giveaways, ignoring the structural rot turning the pension system into a fiscal nightmare.

Germany’s statutory pension scheme is revealing its true nature: a Ponzi structure drained by politically motivated “non-insurance” payouts and kept alive by constant cross-subsidies — a political shell game at its finest.

The Economists’ Appeal

Into this crisis step 22 leading economists and pension specialists. In a joint statement, they urge the government to take the pension package “off the table immediately.”
“For stability, reliability, and trust, we need long-term pension policy that is predictable and fiscally sustainable,” the document reads. The experts argue the government’s current proposal fails on every count and should therefore be abandoned.

Released Monday morning and obtained by Handelsblatt, the paper is a long overdue wake-up call in a debate trapped in coalition infighting.

High-Profile Critics

The list of critics — including pension experts like Bert Rürup, ifo chief Clemens Fuest, and Michael Eilfort of the Stiftung Marktwirtschaft — is long. Their main targets include the fiscally reckless “active pension,” which would allow retirees to earn additional tax-free income; a further expansion of the mothers’ pension; and a political fix that would lock in the current pension level at any cost.

According to the economists, these measures would raise the federal subsidy to the pension system by €10–15 billion annually — a burden Germany’s recession-ridden public finances can no longer tolerate.

The economists also condemn the political choice to shift the costs onto the young: higher payroll taxes, higher income taxes, all to sustain benefits for an older generation. In doing so, they side with young CDU/CSU lawmakers who have recently ramped up pressure on Chancellor Friedrich Merz.

Short-Term Political Bribery

The experts don’t mince words: The pension package is not a reform but a short-term political bribe. With sinking poll numbers for both CDU/CSU and SPD and the steady rise of the AfD, the strategy is obvious: stabilize the voter base with last-minute giveaways.

What’s missing is a long-term, demographically sound strategy that addresses retirement age, private savings, and company pensions. The economists are particularly blunt about the minimum pension level: preserving a 48% benchmark through 2031 is unrealistic and likely untenable.
They highlight a deeper issue: years of economic decline have eroded Germany’s productive base. As prosperity shrinks, all groups — workers and retirees — will lose purchasing power. Political shell games no longer work in a shrinking economy.

“Non-Insurance” Burdens

The debate exposes another long-ignored truth: Germany’s pension system has been hollowed out for decades by political giveaways and ideological trench warfare. “Non-insurance” payouts — including benefits for illegal immigrants — have drained a fund intended solely to manage contributors’ money.

The pension system posted a €2 billion deficit last year. This year, losses may hit €7 billion. If current trends continue, the Bundesbank expects the deficit to exceed €10 billion by 2030 — assuming the economy doesn’t deteriorate further, which is far from guaranteed.

The contributor-to-retiree ratio is collapsing: from 5-to-1 in 1965 to 2-to-1 in 2022. The imbalance will worsen. The pension system is heading into severe turbulence. A looming loss of purchasing power will hit the working population through skyrocketing contributions while retirees see their real pensions erode.

A Moral and Economic Breaking Point

Germany now faces an ethical and economic impasse: How does a shrinking economy deal with rising old-age poverty? Politics offers no answers — this question has never been seriously

confronted.
That the country has reached this point is the result of decades of politicians living off the postwar system’s accumulated substance — while acting as a global welfare provider absorbing external crises into domestic social systems.

Now that the crisis can no longer be ignored, German society must fundamentally reassess. Without statist ideologues and welfare-state engineers, a new intergenerational contract is needed — one that acknowledges the growth needs of the young, the necessity of market-driven reforms, and the dignity of a minimum living standard for the old.

The 22 economists provide an important first step: Germany faces one of the most complex socio-economic challenges of the coming years — a balancing act between responsibility, realism, and morality. And economically, it means one thing: both young and old will have to make concessions.

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About the author: Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.