DIW President Advocates for Lower Pension Increases and Higher Retirement Age

The President of the German Institute for Economic Research (DIW) has called for significant reforms in the pension and tax systems from the upcoming government. Marcel Fratzscher emphasizes the need for a more equitable distribution of pension benefits, arguing that the current system disproportionately favors the older population over the younger and less affluent.

In an interview, he highlighted the importance of not further burdening younger generations, stating that the retirement age must be increased, and future pension adjustments should be moderated. This approach is essential to prevent further financial strain on younger individuals who are already facing economic challenges.

Fratzscher also urged for immediate tax relief for both businesses and individuals with low to middle incomes. He believes that such measures are crucial for stimulating the economy in the short term. He proposed a fundamental overhaul of the tax system, advocating for a reduction in labor taxes financed by cutting subsidies and tax privileges, while increasing taxes on substantial wealth.

Echoing Fratzscher's sentiments, Monika Schnitzer, the head of the Council of Economic Experts, pointed to urgent reform needs within the pension insurance system. She suggested that structural reforms are necessary to limit rising contribution rates, alongside supportive measures to prepare the workforce of all ages for ongoing structural transformations in the labor market.

Schnitzer also outlined the government's role in facilitating the energy transition while minimizing bureaucratic hurdles. She emphasized the importance of fostering collaboration among future economic, financial, and labor ministers to ensure that the German economy regains momentum swiftly.

As the country grapples with the complexities of trade conflicts, the energy transition, and the need for enhanced technological independence, Schnitzer warned of the urgent need for decisive and efficient action from policymakers. The new administration is tasked with developing a budget that strategically utilizes financial resources while identifying saving opportunities that do not hinder growth or compromise social equity.

In light of demographic changes, the labor minister will need to address the implications of an aging population on the workforce.