What Germany’s Chancellor Friedrich Merz said at the National Congress of Banks Monday evening, April 20, amounts to a dismantling of the traditional German pension system and its replacement with schemes making pensions dependent on the speculative ups and downs of financial markets—a script for creating widespread poverty. In response to an inquiry from the Left Party, the Federal Ministry of Labor and Social Affairs (BMAS) reported last fall that 42% of recipients of statutory pensions have to get by on less than €1,000 a month. In many places, single people can no longer even afford a tiny rental apartment.
Said Merz: “This summer we intend to follow the recommendations of the Pension Reform Commission, which will propose a comprehensive reform of our old-age pension systems. Ladies and gentlemen, statutory pension insurance alone will, at best, continue to provide only basic coverage for old age. It will no longer be sufficient to secure living standards in the long term. It must be supplemented by funded elements of occupational and private pension provision, and on a far larger scale than we currently have.” Addressing the bankers directly, he added: “This is where you come in, the banks. We need your support in this endeavor—not only in material terms, but also in terms of ideas and social policy. Demonstrating that funded pension systems also become less dependent on demographics and the labor market will be an important contribution that we all—including you—can and must make to the reform of this pension system.”
His remarks have already provoked protests from labor unions, the Social Democrats, and even the labor wing of his own Christian Democratic party. Under Merz’s proposal, pensions would be increasingly tied to market volatility and far less predictable. Social unrest is to be expected if Merz gets his way.
But Merz had another scandal to present: When Christian Sewing, president of the German Banking Association and CEO of Deutsche Bank, called for the relaxation of banking regulations at the event, Merz expressed openness to the idea: “Important and correct decisions were made after the financial crisis that significantly improved the resilience of the financial sector,” Merz claimed. “But now is the time to re-examine these regulations—especially in light of competition with American banks.”
