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Economists Sound Alarm on Coalition Agreement's Impact
2025-04-23 22:55:09
Economy

Economists Sound Alarm on Coalition Agreement's Impact

Image courtesy of : (Sandro Halank, Wikimedia Commons, https://commons.wikimedia.org/wiki/User:Sandro_Halank)

Prominent economists are sounding the alarm over the coalition agreement between the Union and the SPD, highlighting a lack of necessary reforms. They predict a significant rise in social security contributions by 2035, potentially straining the consumer climate in Germany.

The IGES research institute warns that rising costs in pensions, health care, and unemployment insurance will burden both employers and employees. Critics like DIW President Marcel Fratzscher emphasize the need for effective measures rather than costly promises.

As the demographic shift intensifies, experts urge immediate reforms to stabilize the social insurance system. The proposed pension reforms lack clarity on financing, with a potential contribution rate increase to 20%.

Meanwhile, a contentious debate over the minimum wage continues, with the SPD advocating for a higher rate, while the Union prefers an independent commission's assessment. The coalition's focus on benefits rather than reforms raises concerns about long-term sustainability.

Related news on that topic:

SPD and Green Party Strengthen Coalition Amidst Internal Changes

The Social Democratic Party (SPD) has been actively engaging in coalition negotiations, both within the federal framework and in the city of Hamburg. Manuela Schwesig, Mecklenburg-Vorpommern's Minister-President and member of SPD's negotiation team, has been advocating for the coalition agreement with the Union. She expressed surprise at the substantial gains the SPD achieved in these talks. Schwesig emphasizes the need for structural and personnel changes in response to the party's poor federal election results. SPD members are currently voting on the coalition agreement, with results expected by the end of April. Meanwhile, in Hamburg, the SPD and the Green Party have concluded their coalition negotiations. After four weeks of discussions, they are set to continue their governance of the city for another five years. The parties, which have collaborated since 2015, are awaiting approval of their coalition contract, which is expected to be announced shortly. This collaboration marks a decade of joint governance in Hamburg, highlighting a stable political partnership. In a broader context, Friedrich Merz is finalizing his ministerial list amidst promises of surprises. Speculations include potential candidates for key ministerial roles, as the coalition contract nears completion. Concurrently, the SPD is intensifying efforts to raise the minimum wage to 15 euros, a move met with resistance from the CDU. This internal and external negotiation landscape underscores the dynamic and evolving political scene as the SPD seeks to solidify its influence and address existing challenges.

SPD Pushes for Minimum Wage Increase Amidst Union Resistance

The SPD is escalating its campaign for a minimum wage increase to 15 euros, threatening statutory measures should the Minimum Wage Commission fail to recommend such a rise. Recently, the Commission announced increases to 12.41 euros in 2024 and 12.82 euros in 2025, which the SPD deems insufficient. According to the coalition agreement, a 15-euro minimum wage could be achievable by 2026. This push has sparked significant contention with the Union, particularly the CDU, which opposes a politically mandated wage increase. They advocate for the Commission to base its recommendations on median wage developments instead. The SPD’s position is further complicated by internal pressures from its members, who seek a resolution aligning with the coalition's promises. Critics, including economic experts, warn that the SPD's approach could jeopardize economic stability and growth. The debate also highlights the role of various stakeholders, including employers and trade unions, in the Commission's deliberations. As this conflict unfolds, it poses a potential risk to the fragile coalition's unity and the broader economic landscape. The urgency of the matter is underscored by the upcoming governmental timeline, with discussions expected to intensify as the deadline approaches.

Read 8 more recent news on this topic

The press radar on this topic:

Frankfurter Rundschau
22. April 2025 um 18:00

Economists tear apart the coalition agreement - and warn of a 'contribution tsunami' until 2035

Leading economists criticize the coalition agreement between the Union and the SPD due to a lack of reforms and warn of a drastic increase in social security contributions by 2035. The Berlin research institute IGES forecasts that pensions, health, long-term care and unemployment insurance will become more expensive for both employers and employees in the future, which could burden the consumer climate in Germany. DIW President Marcel Fratzscher criticizes expensive promises in the contract in..
DER SPIEGEL
23. April 2025 um 12:23

Pension, Health, Care: How the Coalition is Abandoning Contributors - DER SPIEGEL

Demographic change poses significant challenges to social systems. Calculations indicate that contribution rates for pensions, health, and care will rise significantly in the future. However, the future government initially continues to draw from the contribution funds instead of finding long-term solutions. This leaves contributors in the lurch and exacerbates the problems in the social systems.
Frankfurter Rundschau
23. April 2025 um 11:43

Klingbeil wants to tackle pensions with Black-Red – what this means for retirement provision

Black-Red plans pension reform; an expert commission is to develop proposals. The pension level is to remain stable, but financing is unclear. Higher contributions are threatened, as there are more retirees and fewer contributors.
stern
23. April 2025 um 17:08

Coalition Agreement: Union and SPD Clash Again Over Minimum Wage

Two weeks before the government takes office, the Union and SPD are once again arguing about the minimum wage. The SPD insists on 15 euros, while the Union refers to the independent minimum wage commission that is supposed to set the amount. The coalition agreement stipulates that the commission should orient itself to 60 percent of the gross median wage, which, according to the SPD, would allow for a minimum wage of 15 euros by 2026. The Union rejects a 'political minimum wage' and wants to a..
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