General News, Euro and pensions: A transfer union has nothing to do with solidarity, 09.10.2014

Euro and pensions: A transfer union has nothing to do with solidarity


Confusion in the pensions debate: Do "more and more Germans finish work earlier," although they "have less money" to get by? Media are reporting this, relying on the pension statistics (1). According to their latest numbers, never before have so many pensioners had to accept deductions on their "rule" pension as today. This does not, however, mean that "ever more Germans" finish their careers earlier - the opposite is the case: the average retirement age has increased (2) in the last decade from 60 years to 63 years. On the other hand, the number of those who can enjoy their early retirement without deductions on pension level has sunken. Both developments are connected - they are the result of the pension reforms in Germany that restrict early retirement and increase the regular retirement age gradually to 67 years. These reforms relieve the contributors who have to pay into our PAYGO social security system for retirees. This relief serves intergenerational justice because in the future (for demographic reasons) fewer and fewer younger support more and more older people. These rising pension contributions for workers threaten not only to reduce the prosperity of the younger labor force but also jeopardize competitiveness and employment. To prevent this, cuts in the pension system were inevitable.

These reforms have always been painful, particularly for older workers that need to take early retirement because they cannot find work anymore(3). It is therefore crucial to improve the employment situation of older workers. There is still a lot to do, especially for the over-60s. At the same time, progress is unmistakable. Between 2000 and 2011, the employment rate of 55-64 year old workers in Germany has increased from 38% to 60%. This puts Germany in the Euro zone at the top; a similar level has been reached only by Finland (57%), Estonia (57%) and the Netherlands (56%). Everywhere else (according to data from the EU statistics), the employment rate of 55-64 year olds in 2011 had been much lower. In Spain, at almost 45%, in France 42%, in Greece below 40% and in Italy only 38 %(4). These countries had clearly missed the official EU target to increase the employment rate of 55-64 year-olds by at least 50% until 2010 .

This is not only due to women, whose labor force participation is being constantly criticised by the EU Commission as being too low. The employment rates of men who are still the main breadwinner in most households are especially too low. It looks particularly bleak for our neighbors on the other side of the Rhine, nowhere else in the euro zone (except in Slovenia) are older men so rarely employed as in France(5). The reasons are, to start with, due to the weak labor market and particularly the pension system. Regularly, French workers retire at the age of 62, some groups even at 55 years of age(6). At the same time, according to the EU statistics, pensions in France are generously sized, in comparison to workers' incomes (7). Can France afford it simply because it has more children? This is indeed questionable, since despite the younger population, the pension expenditure measured by Gross Domestic Product is higher in France than in Germany. Pension expenditure within the Euro zone is higher only in Austria and Italy(8). It cannot seem surprising that the governments of these very wealthy countries are pushing into a "transfer union": They want to avoid painful reforms, in particular of the pension system, and then to pass on the costs to others. Through this, they agree with the bailout countries that have lived beyond their means.

This is particularly evident in the pension expenses, which increased there by leaps and bounds from 2000 to 2010(9). German workers and pensioners, who had to do with less during the first Euro decade, are to foot the bill. Their standard of living in old age (the government has preached and decreed) should be backed up "responsibly" by an additional private pension plan ("Riester pension"). However, they no longer get Interest on their savings, instead ??the Euro bailout policy gradually devalues their assets(10). This is unfair and hostile to achievement - this policy is likely to be devastatingly expensive not only for the Germans but for all Europeans. Solidarity and subsidiarity within the European Union have nothing to do with this anymore.


(1) Example http://www.zeit.de/wirtschaft/2013-01/fruehrente-trend-studie
(2) See the Eurostat data on "exit age" available at http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
(3) Contrary to popular news and panicked scenarios about age poverty through early retirement and pension there is also another explanation for the high incidence of early retirement: Many employees do not want the growing stress of working life prior to retirement and can afford cuts for an earlier withdrawal from the labor force. The early retirement in these cases is not poverty, but a wealth phenomenon
(4) See: "Employment rates of older workers in Europe 2011" (figure below)
(5) Ibid
(6) See: http:// altewebsite.i-daf.org/474-0-Wochen-24-25-2012.html.
(7) This is the only way to explain that the income of the over-65s in France reaches 100%  of the median income of the total population, whereas in Germany it reaches only 91%. See: Federal Statistical Office: Seniors in Germany: Mostly secured vitally and financially, STATmagazin of 21 December 2012 (available at: www.destatis.de)
(8) See: "Growing pension expenditure in the euro zone - consolidation only in Germany" (figure below)
(9) "Growing pension expenditure in the euro zone - consolidation only in Germany"; "Cost containment through employing the Elderly" (figure below). Note: Especially Portugal affords pension expenses that overwhelm its power output massively. They exceed the respective share of the gross domestic product in Germany and almost reach the values ??of France - and with an incomparably lower economic power. Nowhere else during the first Euro decade has pension expenditure risen so high. Worryingly, this is mainly in view of the extremely unfavorable demographic situation in Portugal: The aging here is compared to other countries later on but all the more fierce, that with an unchanged pension system, there must be significantly higher burdens in the future
(10).See: http://altewebsite.i-daf.org/467-0-Wochen-18-19-2012.html