German Pensions Reform Plan Inches Forward

Published December 19th, 2000 - 02:00 GMT

Germany's controversial pension reform plan took another small step forward Tuesday when members of parliament of the ruling coalition gave their backing to a new version, revamped to take account of trade union views. 

Officials of the Social Democrats (SPD) and the Greens said that a majority of their MPs supported the plan in its latest form, with only a few abstentions at separate special meetings held to debate it. 

However, details of the plan still have to be worked out before it is put to a parliamentary vote some time after the New Year, and its final fate may depend on the conservative opposition, which has shown itself divided on the issue. 

After the meetings, Labor Minister Walter Riester, SPD parliamentary whip Peter Struck and his counterpart for the Greens, Kerstin Mueller, called on the Christian Union opposition parties to work for consensus on the plan and not block it for tactical reasons. 

The SPD-Greens coalition last Friday unveiled a new version of Riester's plan in response to strong opposition from the trade unions and the leftwing of the SPD. Riester and Chancellor Gerhard Schroeder on Sunday night then persuaded leaders of Germany's powerful unions to support that. 

Riester says it has been agreed that contributions to the statutory pension scheme must not exceed 22 percent of gross salary over the next 30 years, and that pensions will not fall below 67 percent of net average income. 

A key aspect of the reform was to have been introduction for the first time of a private capital element in workers' pensions. Schroeder himself had insisted on this. 

Critics of the latest plan, such as the employers, complain that now there will be no incentive for private pension investment by employees, and that the level of pensions should be reduced to about 62 percent of income. 

The present pension level is about 70 percent of income, and Riester's original plan would have cut it to 64 percent by 2030. 

The German pay-as-you-earn old-age pension system has been coming under increasing financial strain because retirees are living longer while proportionately less people are in work, pushing up contributions to unacceptable levels and weighing on labor costs. 

The picture of what is now happening is unclear. "It is becoming increasingly difficult to assess the German government's pension reform plan," the conservative Frankfurter Allgemeine Zeitung said in an editorial Tuesday, noting that "reliable details remain unavailable". 

Following major tax changes earlier this year, Schroeder has had his sights set on pushing pension reform through parliament, presenting this as a second central plank of his legislative program. 

He has warned the opposition not to block it, after they tried and badly failed to block the tax reform -- BERLIN (AFP)  



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