The only constituency in Germany’s national election that matters

BERLIN – Ukraine or Oma?

With Germany’s Social Democrats struggling to resuscitate their sagging fortunes with just a month until election day, party leaders are getting desperate.

“We can't give Ukraine anything that we would have to take away from our pensioners or local authorities,” SPD Secretary General Matthias Miersch, who is overseeing his party’s campaign, told a German newspaper last week, igniting controversy.

What made Miersch’s remarks so shocking was that Chancellor Olaf Scholz hasn’t missed an opportunity in recent months to boast that Germany has been by far Ukraine’s biggest supplier of military aid in Europe.

Miersch, in a carefully planted interview, made clear that commitment wasn’t etched in stone, Trump or no Trump.

Pension politics

To understand why, look no further than Germany’s demographic pyramid.

With over 40% of eligible voters 60 or older, up from 34% twelve years ago, Germany’s election is largely a race to win the elderly. They are a group with one big priority: pensions.

With their backs against the wall, the Social Democrats have resorted to outright pension alarmism, accusing the rival Christian Democrats (now polling at about 30%, compared to the SPD’s 15%) of planning to cut pensions, while casting themselves as defenders of the elderly.

During his acceptance speech for his party nomination earlier this month, Scholz warned, without offering evidence, of “bitter cuts” to health care and pensions, two red-letter issues for retirees.

The CDU quickly denied such plans, in part because they’re just as dependent on the elderly as the SPD.

Pensioners, and those who will retire soon, are not only a growing voter group but also the last bastion of Germany’s traditional Volksparteien – the centre-left SPD and centre-right CDU – whose voters are ageing even faster than the overall population.

It’s no coincidence that the two parties’ lead candidates, Scholz, 66, and the CDU’s Friedrich Merz, 69, are themselves ripe for retirement.

In the last election in 2021, the Christian Democrats and SPD scored a combined result of 73% of voters of 70 or older, while only reaching a combined 25% among young voters of ages 18 to 24.

€500 billion price tag

Scholz wants to fix the level of state pensions at 48% of average earnings, a level many analysts say is unsustainable if Germany doesn’t lift its retirement age, which is currently at 67.

While cuts of pensions at face value are ruled out in Germany by law, Scholz warns that in ‘real’ terms, adjusted for purchasing power, pensions could nevertheless fall if his reform is not adopted. Without such a reform, the legal guarantee will end in July 2025.

But Scholz’s plan comes with a huge price tag, particularly for the young generation. Until 2045, a stabilisation of the pension level would come with additional costs totalling €500 billion, the German court of auditors reckons.

Given the rising number of pensioners, while the working population paying into the system will stagnate, employees and employers will shoulder most of this through rising contributions, on top of the already increasing contributions for public health insurance.

This would lead to “significant additional burdens for employees and higher labour costs for companies,” the court of auditors warns.

There is no discussion of extending a second legal guarantee, also expiring this year, which limits pension contributions to a maximum of 20% of gross income.

In addition, Scholz’s proposal would mean increasing costs for the federal budget.

Presently, over €110 billion is transferred from the federal budget to the pension system each year, as it can no longer be financed by contributions alone.

With Scholz’s plan, those payments would increase even further, despite the country’s huge other spending needs, such as investments into its crumbling infrastructure or rising defence spending.

No wonder, then, that people lose trust in the system.

SPD co-leader Saskia Esken was recently laughed at by the audience of a TV talk show when she denied a journalist’s claim that the pension system becomes unaffordable.

It was probably moments like this that Clemens Fuest, head of the influential Ifo Institute, had in mind when he warned last week that German politicians appear to be “afraid of the voter” and not willing to honestly discuss the country’s economic problems.

Centre-right shies away

Even conservative Christian Democrats, who like to present themselves as tellers of difficult truths, shy from major debates around pensions.

While opposing Scholz’s proposal to anchor the pension threshold in law, the centre-right nevertheless hopes for “a stable pension level guaranteed by economic growth.”

Though the Christian Democrats have previously advocated coupling the retirement age to the rising life expectancy, they have gone quiet on the question more recently.

When asked how to tackle the financial woes of the federal budget, Christian Democrats prefer to talk about unemployment benefits – reformed by the last government – rather than pensions.

But the costs for the federal government for unemployment benefits are less than a quarter of the annual grant to the pension system, and even drastic cuts there would not suffice to finance the CDU/CSU’s wish list, such as corporate tax cuts or higher military spending.

Compared with 21 million pensioners, the five million unemployed seem to be an easier target, however – certainly coming with a lower risk of losing a core constituency.