Is Germany headed for a period of austerity?
Grimm, who is a member of Germany's Council of Economic Experts, which evaluates the country's economic policies, warned that, "We will not be able to finance the system [as it is] in the long term."
She added, "This also means that we will have to cut benefits from time to time."
"We need more honesty in pension, long-term care and health insurance about which services we can really afford and which we cannot," she told the
Funke
media group.
Grimm suggested that people living in Germany need to be aware that the state-funded pension system, as well as long-term care benefits for the elderly, will likely need to scaled back in the future.
Appearing to speak directly to government leaders, she said, "If you make promises to people that you can't keep in the end, then they don't make private provisions, even though many could."
The black-red coalition government - comprised of the conservative Christian Union parties (CDU/CSU) and the centre-left Social Democrats (SPD) - has so far embarked on an ambitious spending spree. They quickly succeeded in loosening the country's debt brake and getting approval to significantly up the country's debt in order to fund massive expenditures in defence and infrastructure, as well as maintaining the pension system.
But as they pour money into these areas, they've also warned about needing to cut back spending elsewhere.
Cuts in unemployment benefits and health insurance
Introducing
Germany's budget for 2026
, Finance Minister Lars Klingbeil (SPD) warned that the country's new debt will be "one of the biggest domestic challenges" to navigate in the coming year.
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To that end, we've heard a number of proposals from leading politicians about where budgets could be trimmed back.
For example, CSU chair Markus Söder said last week that he'd like to see
Bürgergeld
(citizen's allowance) benefits
scrapped for all Ukrainian refugees
- as opposed to just the new arrivals as the black-red coalition had already agreed.
CDU General Secretary Carsten Linnemann has advocated more broadly for the complete withdrawal of
Bürgergeld
from recipients who don't accept work offers.
Another area that could see services cut back: statutory health insurance benefits.
According to media reports, a gap of around €12 billion will be seen for health insurance funds from 2027. The government has so far neither confirmed nor denied the figure, but chairman of the board of directors of statutory health insurance provider Techniker-Krankenkasse (TK) confirmed the financing gap and openly criticised the Finance Minister.
German Finance Minister and Vice Chancellor Lars Klingbeil arrives for a press conference to present a draft of Germany's federal budget for the year 2026. (Photo by John MACDOUGALL / AFP)
For his part, Chancellor Friedrich Merz had spoken in favour of reducing health insurance expenditures in his summer interview with
ARD
.
"Where does personal responsibility begin?" Merz quipped.
READ ALSO:
After busy first 100 days, Germany's Merz faces discord at home
Pensions guaranteed until 2031
One place the government doesn't want to makes cuts is to pension payments.
This week, the Federal Cabinet launched a pension law intended to ensure a stable pension level until 2031, it will also expand pensions for millions of mothers (
Mütterrente
).
READ ALSO:
Tax cuts and pensions - How Germany's budget changes could impact you
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Funding for the pension system is to be paid for with taxpayers' money. Working people and employers are set to see pension contributions rise slightly in 2027 - from today's 18.6 to 18.8 percent.
Increasingly large pension costs are all but guaranteed in Germany's future. As
The Local
columnist, Brian Melican put it in
a recent op-ed on the issue
: "As pensioners make up an ever-growing proportion of the electorate, no major party will campaign to make them even marginally worse-off."
Criticism of austerity politics
Responding to Grimm's warning, SPD parliamentary group leader Dirk Wiese told the
Funke
newspapers, "The neoliberal approach of seeking solutions only by cutting benefits for citizens in our country is too simplistic and does not get our approval."
Green parliamentary group vice-chairman Andreas Audretsch further criticised that women would be plunged into old-age poverty if pensions were to be further reduced. "We have to look at other adjusting screws, for example, by enabling people to work..."
Austerity measures, particularly cuts to government services and increases in taxes, have been linked to adverse impacts on the poorest segments of the population.
Also,
research
has linked austerity measures with both electoral abstention and votes for non-mainstream parties. In other words, cuts to services and welfare in Germany could be expected to boost votes for far-right and far-left parties - exactly the opposite of what conservative CDU/CSU leaders say they are trying to avoid.
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