full article at:
<http://www.independent.co.uk/news/World/Europe/2001-01/taboo270101.shtml>
Germany breaks taboo to defuse its pensions timebomb
By Imre Karacs in Berlin
27 January 2001
A much-trimmed blueprint for the overhaul of Germany's stretched state pension
system was passed by the lower house of parliament yesterday.
Hailed by the government as "the greatest social reform since the war", the Bill
breaks a taboo by cutting benefits and encouraging workers to make up the
difference through private pensions. The changes have become necessary because
individual as well as state contributions were heading for an explosion.
Under the new system, state pensions will gradually fall to 67 per cent of final
salary from the current 70 per cent over the next 30 years. Though that will
still leave German senior citizens the envy of the world, in a country that has
taken index-linked pensions for granted, the small cut has provoked deep
anxiety.
According to a poll conducted yesterday, 77 per cent of Germans feared that
their pensions were unsafe.
Unlike almost everywhere in the industrial world, Germans have had no need for
private or company pensions, so generously has the state treated them until now.
Few Germans have bothered to save forretirement, even though the state pension
is taxed.
But the population is shrinking and ageing. Over the next decades, there will be
fewer workers to pay for an ever- larger number of the idle rich.
The need for reform has been recognised for decades, but previous attempts at
reform were scuppered by powerful lobbies. Chancellor Gerhard Schröder's
government has also been forced to rein in its early ambition, after vehement
protests from trade unions.
Now it is the opposition's turn to force through further amendments before it
allows the Bill's passage through the upper house, the Bundesrat. It faces
further tinkering before becoming law after a vote expected on 16 February.
But modest as the reform may be, German business is generally relieved that the
government is at last pruning a little bit of the bloated wage bill.
Yesterday's debate was poisoned by a dispute over an opposition poster depicting
the Chancellor as a criminal guilty of "pension fraud". The leader of the
centre-right Christian Democrats, Angela Merkel, stopped short of apologising
outright for the poster, which was scrapped on Wednesday, the day after it was
unveiled.
"We didn't want to criminalise the Chancellor, but in effect that happened," Ms
Merkel said. "I regret that it could have been understood that way."
Ms Merkel, who broadly favours liberal reforms, called the end result of much
haggling a "bureaucratic monster".
