Economic Expert Predicts Inevitable Cuts to Social Benefits in Germany

The financial status of Germany's social security systems is becoming increasingly precarious, prompting discussions on potential reforms. Economic expert Veronika Grimm has urged the government to prepare citizens for necessary reductions in benefits across various social programs, including pensions, healthcare, and nursing care.

In a recent statement, Grimm emphasized the need for transparency regarding what can realistically be afforded within these systems. She highlighted the unsustainable nature of current promises, such as the commitment to maintaining pension levels at 48% of average earnings. According to Grimm, such commitments cannot be upheld over the long term.

Grimm, a member of the government's Council of Economic Experts, indicated that individuals who are able to partially finance their own care should do so, as this is essential for the sustainability of the nursing care system. Recent analyses have indicated a rise in out-of-pocket expenses for those in nursing homes, surpassing an average of EUR3,100 per month.

Furthermore, Grimm pointed out the rising cost of labor due to increasing payroll taxes, which currently stand at 42% and may rise to 45% by the end of the current legislative term. This trend raises concerns about the attractiveness of employment in Germany.

A working group established by the federal government is currently developing proposals for reforming the nursing care system, led by Federal Health Minister Nina Warken. In terms of pension reforms, a commission is set to commence in early 2026, with recommendations expected by 2027. This initiative aims to address long-term sustainability beyond the current legislative period.

Current statistics reveal that approximately 22.3 million people in Germany received benefits from statutory, private, or occupational pensions in 2024, reflecting a year-on-year increase. A total of around EUR403 billion was disbursed, marking a 5.7% rise compared to the previous year.

While discussions continue regarding potential reforms, some political figures express skepticism about the feasibility of implementing recommendations from the pension commission before the next federal elections. There are suggestions for integrating civil servants into the pension insurance system, a proposal that faces opposition from coalition partners.

Grimm cautioned that merely including civil servants in the pension system would not resolve the underlying issues, suggesting that it could divert attention from more effective solutions. Scholars have proposed that civil servants should work longer than other workers, citing differences in life expectancy as a factor in achieving a more equitable pension system.