The new German government if facing series of challenges with most importantly the rising healthcare costs
The German Economic Institute (IW) expects taxpayers and social security contributions to face additional burdens due to the social policy plans of the future German government, which comprises the Christian Conservative coalition and the Social Democratic Party (SPD).
“The new coalition is heading towards major financing difficulties,” according to Jochen Pimpertz, a tax and social affairs expert at the institute.
Pimpertz stated that social security contributions for employees and employers have already risen to 42.3% of income, pointing to a study conducted by the IGES Institute, which predicts an increase of nearly 46% in the coming years.
Pimpertz attributed these forecasts primarily to rising healthcare costs, noting that spending in this sector has increased more than previously anticipated, as lawmakers required health insurance funds to reduce their financial reserves in the wake of the Covid-19 pandemic in order to stabilize subscription rates.
He explained that there are now no longer reserves that would mitigate the continued increase in subscription rates.
According to Pimpertz, the Christian Democratic Union and the Social Democratic Party want to abandon the current basic principle that current pensions will be financed primarily through social security contributions.
In the ruling coalition agreement, the Christian Alliance and the Socialists promised to maintain the pension level at 48% until 2031.
Pemberton stated that achieving this goal would require increased spending estimated at billions of Euros due to an aging population, noting that the ruling coalition agreement stipulates that these allocations would be provided through tax revenues.
He said, “I wouldn’t want to be in the position of the finance minister who would have to make the decision on this matter.
