Call to work un­til 69 un­der fire

The Myanmar Times - - International Business -

THE Ger­man cen­tral bank’s call for peo­ple to work un­til age 69 has reignited a fierce de­bate in Europe’s fast- age­ing top econ­omy, with an­a­lysts back­ing it while politi­cians show their op­po­si­tion ahead of key elec­tions.

Econ­omy Min­is­ter and Vice Chan­cel­lor Sig­mar Gabriel was swift to con­demn it, say­ing, “A fac­tory worker, a shop as­sis­tant, a nurse, a care-giver would find this idea nuts. So do I.”

The of­fend­ing idea is a pas­sage in this month’s Bun­des­bank re­port, which noted that “the cur­rently sat­is­fac­tory fi­nan­cial situation of public pen­sion trea­suries should not dis­tract from the fact that other changes would have to be made to en­sure its sus­tain­abil­ity”.

And what the bank pro­posed to en­sure sta­bil­ity of the pen­sions sys­tem is a fur­ther grad­ual in­crease in the le­gal re­tire­ment age, al­ready set to go from 65 to 67 by 2029, to reach 69 years by 2060.

Life ex­pectancy in Ger­many at present is 78 for men and 83 for women, and it is con­tin­u­ing to rise.

Even if Ger­mans are de­lay­ing their re­tire­ment, the ef­fec­tive age when most leave em­ploy­ment is 62.

That means around two decades worth of pen­sions need fi­nanc­ing, while at the same time the work­ing pop­u­la­tion fund­ing these pay­ments is shrink­ing as the coun­try ages rapidly.

The Bun­des­bank had al­ready come up with the magic num­ber back in 2009. But it re­sus­ci­tated the 69 fig­ure last week as it wanted to “con­trib­ute to the de­bate” and in­cite politi­cians to adopt a more long-term vi­sion.

Po­lit­i­cal par­ties, which are al­ready warm­ing up for gen­eral elec­tions next year, are ex­pected to make pen­sions a key theme of their cam­paigns.

With 20 mil­lion re­tirees el­i­gi­ble to vote, politi­cians will be seek­ing to win on is­sues rang­ing from the level of fu­ture pen­sions and the ques­tion of equal­is­ing pen­sion pay­ments in east and west Ger­many, to the amount of con­tri­bu­tions to be levied on fu­ture work­ing gen­er­a­tions.

But no one ex­pects to win votes by telling Ger­mans they would have to work two years longer.

Mr Gabriel’s So­cial Democrats has firmly re­jected the idea of rais­ing fur­ther the re­tire­ment age.

For Chan­cel­lor An­gela Merkel’s Chris­tian Democrats, the ques­tion has not even arisen, the party’s gen­eral sec­re­tary said, stress­ing that 67 is the right age for re­tire­ment.

But econ­o­mists threw their weight be­hind the Bun­des­bank and some even chal­lenged the bank’s es­ti­mate as fall­ing on the low end.

Ac­cord­ing to es­ti­mates by eco­nomic think­tank the IW In­sti­tute, Ger­mans would need to work un­til 73 if they want to main­tain their pen­sions and con­tri­bu­tions at cur­rent lev­els. Axel Bo­er­sch-Su­pan, an economist at the Max Planck in­sti­tute, mean­while sug­gested that the re­tire­ment age should be pegged to the de­vel­op­ment of life ex­pectancy.

Ger­man politi­cians’ re­fusal to ad­dress the is­sue on what comes after 2030 sim­ply shows a “fear of con­fronting the truth”, said Mr Bo­er­schSu­pan. But the is­sue is mak­ing many nervous, par­tic­u­larly when many savers are see­ing lit­tle gain from their long-term in­vest­ments against the back­drop of the Euro­pean Cen­tral Bank’s low in­ter­est rate ex­pan­sion­ary pol­icy.

Mr Huether how­ever ar­gued that the Bun­des­bank’s sug­ges­tion was likely to be the “least dam­ag­ing so­lu­tion for ev­ery­one”. –

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