The German government, which has been in power since May and consists of the centre-right Christian Democrats and Christian Social Union (CDU/CSU) and the centre-left Social Democrats (SPD), promised the German people that it would avoid the kind of infighting that made the previous government under former Chancellor Olaf Scholz (SPD) its most unpopular ever. In some cases it has been successful in doing so.
Although issues ranging from immigration policy to military service were hotly debated within the government, a solution was eventually found.
However, the dispute over the old-age pension insurance system now threatens to become a serious test for the coalition under Chancellor Friedrich Merz (CDU).
Key government representatives are still trying to reassure the public. In an interview with DW on Monday, Federal Interior Minister Alexander Dobrindt (CSU) said: “The fact that there is discussion and even broader debate about one or two projects is, in my opinion, normal in politics. It always depends on whether you are on the path to a solution or just taking a blockade stance. And I see that we are moving towards a solution.”
Germany’s pension system has been in crisis for a long time
Pensions have been a subject of constant debate in German politics for decades. People are living longer, which means they are withdrawing money from state pension funds longer after retirement. And as society is aging, their number is increasing.
With the exception of civil servants and self-employed people, most Germans pay into state retirement funds. Both they and their employers pay 9.3% of gross income, a total of 18.6%. The specific amount of a person’s pension is determined by factors such as their contributions over their working life, as tracked by pension points, which are then converted into monthly payments.
But this calculation no longer works because there are fewer and fewer contributors paying into the system to support the growing number of pensioners. As a result, the pension system is receiving billions of euros of support from the federal budget. In 2026, this amount will amount to €128 billion ($148 billion), or less than a quarter of the total budget of about €524 billion.
The pension issue is being framed by some as a matter of “intergenerational justice”. Should young people in Germany accept that the current generation of pensioners are comparatively well provided for and that future generations will pay for it if the state goes into debt to do so?
Coalition agreement to increase pension by 2031
In their coalition agreement, the Conservatives and Social Democrats agreed to freeze the statutory pension level at the current level of 48% of the average earner’s income by 2031.
Over the past few weeks, the government has prepared a legislative proposal for the pension system and plans to have it passed by Parliament in December. The draft includes some conservative projects: a plan to encourage pensioners to continue working, called “active pensions”, and the CSU’s favorite project of increasing pensions for aging parents – known colloquially as “mother’s pension”. But mainly at the insistence of the SPD, there is also a provision to extend the pension level beyond 2031.
The CDU/CSU’s youth organization, Jung Union (Young Union), argues that this would lead to additional costs of approximately €120,000. At their meeting over the weekend, delegates unanimously decided to call on young conservative legislators in the Bundestag not to approve the pension package in its current form.
Chancellor Merz was for many years a role model for Jung Union members, who considered him a pragmatic reformer with a clear conservative profile. After the youth group rejected the pension plans, Merz appeared as a guest speaker at Rust. Visibly agitated, he called on the assembled delegates: “Please participate constructively in this debate, but not just by saying what won’t work.”
Merz’s ruling coalition has a slim majority of only 12 votes. Therefore, 18 MLAs below 35 years of age can cancel the pension agreement.
The Social Democrats are digging in their heels. SPD Chairman, Finance Minister and Chancellor Lars Klingbeil announced that his party was not prepared to consider any changes. “Let me make it absolutely clear: nothing else will be changed in this law,” Klingbeil told a regional party conference on Sunday.
CDU’s education minister calls for postponement
But the young conservative MPs have received support from some high-ranking CDU politicians. Economy Minister Catharina Reich (CDU) has warned against additional burden on already high non-wage labor costs. To smooth the situation, Education Minister Karine Prien (CDU) proposed postponing the vote.
How nervous the government is at the moment – and how the media is viewing it – became clear when Friedrich Merz appeared at an “economic summit”. south german Newspaper on Monday. There, he denied rumors that a dispute over pensions could lead to the collapse of his government and dismissed rumors that he would consider working alone with his CDU/CSU union in a minority government.
“In my view, there is no question of doing something like this,” the chancellor said, before asking, “Does anyone seriously believe that we can work with a changing majority in this German Bundestag and still have proper legislative work?”
The Chancellor now wants to try to persuade the SPD to make a small concession in the “consistent text” of the draft law. This should include a commitment to re-discuss pension development after 2031. However, it remains to be seen whether the Social Democrats and young CDU/CSU parliamentarians will agree on this.
SPD Labor Minister Barbel Baas said at the same economic summit that if the pension package was not passed there would be “great unrest in my party and in my parliamentary group.” She does not hold the SPD responsible. “The people who are currently endangering the coalition are those sitting in the CDU/CSU,” Baas said.
This article was originally written in German.
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