Old-age provision: How Germany finances high pensions in EU countries

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Lush aid from Brussels: Star economist Raffelhüschen: Germany finances generous pensions in EU countries

The pandemic is having a massive impact on the German economy. But other EU member states are also suffering from the costly consequences of the lockdowns. The EU has therefore approved an aid program worth 750 billion euros. The pension expert Bernd Raffelhüschen criticizes the procedure sharply.

The European Union is helping its member states with 750 billion euros against the consequences of the Corona crisis. The money does not come directly from Brussels, but is paid for by the individual member states. As the economically strongest EU member, Germany is also particularly challenged by the Corona aid program.

Many billions flow as grants

The 750 billion euros from the EU coffers are divided into two parts: 360 billion flow as loans that the recipient countries have to repay. But 390 billion euros go to the member states as grants. They are non-repayable and are therefore a gift to the respective countries.

The distribution mechanism of who gets how much money from which pot corresponds to the pandemic-induced economic slump in the individual countries. And probably the negotiating skills of the politicians involved.

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Italy and Spain benefit particularly

The non-repayable EU grants are about immense amounts: Italy can hope for around 65 billion euros in grants. Spain can expect around 59 billion euros, as the “Bild” newspaper writes.

With these billions, so the accusation of experts, the countries can finance their lavish government expenditures. Bernd Raffelhüschen, for example, represents this position. The renowned economist is Professor of Economics at the Albert Ludwig University of Freiburg. He is one of the best-known pension experts in Germany.

A flood of money is helping some EU countries to reorganize their budgets

Raffelhüschen expressed his fundamental criticism of the construction of the aid packages in an interview with FOCUS Online: “The non-repayable subsidies are rewards for misconduct in the run-up to the Corona crisis.”

And he mentions the central point from his point of view: The use of these funds in the recipient countries “basically relieves the state budgets – including those of the state pension institutions”.

You have to know that the pension funds are currently only partially filled by the contributions of the employees. That applies to many countries. These payments account for roughly two-thirds of the pension fund’s income. States finance the missing third through tax subsidies – in Germany, but also in Italy, Spain and France.

Raffelhüschen sums up his position succinctly: “Germans retire later and have a lower pension level – and pay the higher pension level of people who retire earlier than German citizens through EU funds in Italy or France.”

The billions in aid allow some recipient countries to forego urgently needed pension reforms. They are overdue in order to finally get the escalating costs of state pension schemes under control.

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Southern Europeans draw longer and better pensions

The reason for the high costs: The pension systems of many other countries are much more generous than the German one. This can be seen when comparing two important key figures:

  • How long does someone work on average and finances the pension fund with his contributions?
  • What is the average pension compared to the last earned income before retirement?

The Organization for Economic Cooperation (OECD) has determined these values ​​for numerous countries. For men with pension insurance in Germany, the data as of 2018 are:

  • a male employee occurs on average in his working life 39.1 years of work
  • at retirement age he draws on average 51.9 percent his last earned income (including private sources of money)

The OECD calculated this in a study from which the “Bild” newspaper also quotes.

For the largest recipients of lavish aid funds from Brussels – France, Italy and Spain – the following values ​​result:

In all three countries of comparison, the following can be seen: employees work significantly shorter periods of time, but receive relatively much higher pensions. So it doesn’t take a lot of imagination to assume that some of the billions in aid in the countries listed will end up in the cramped pension coffers.

Negotiated under the German EU presidency

When the EU Corona aid was negotiated, Germany held the EU presidency. Perhaps the federal government in Brussels should have slowed down a little more.

Countries like the Netherlands and Austria also afford expensive pension systems. But there the citizens finance their pension system themselves (with high taxes). The German government evidently failed to insist on this self-financing in southern Europe during the German EU presidency.

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Oldage provision Germany finances high pensions countries

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