2012-04-07

Not great news for working Germans

Germany has realised that it has a demographic problem and is actually trying to do something about it. You have to give Angela a certain amount of props for at least tackling the issue.

The approach is quite straight forward:

Angela Merkel's Christian Democrats have drafted proposals that, if law, would require all those over 25 to pay a proportion of their income to cushion Germany against a looming population crisis.
The German Chancellor's ruling party is seeking extra sources of revenue to pay for soaring pensions and bills for social care costs as Germany's "baby boomer" generation ages amid a decline in the birth rate.
I can see that this will at least make an impact on the forthcoming financial crisis, but I'm not sure it's going to be enough; actually, I am sure that it won't be anything like enough. The tax targeting is quite smart - don't tax the youngsters who are just starting work, and tax a proportion of income rather than a flat rate - but I can see the same problem occurring here as with anywhere else in Europe. Working schmucks will pay more and more money to fund the existing pensioners, in return for smaller and smaller benefits themselves as pensions are progressively trimmed.

At some point, even the traditionally stalwart working German is going to reach the limit of his or her tolerance of unfairness, and put a stop on the ratcheting tax increases. Angela is only postponing the time when Government will need to renege on the promises made to current and future pensioners. When that happens, the reverberations will make the current Greek riots look like afternoon tea at Claridge's.

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