Leading economists express deep skepticism about the “black-red” coalition’s commitment to necessary reforms. According to Marcel Fratzscher, president of the DIW, he finds it difficult to believe that the coalition is capable of implementing major structural changes related to subsidies, taxes, or pensions. While he personally trusts the Chancellor, Friedrich Merz (CDU), to make sweeping changes, he doubts the willingness of the major parties-the CDU, CSU, and SPD-to support such initiatives.
Oliver Holtemöller, vice president of the Leibniz Institute for Economic Research, attributes the political hesitation to the current robust state of the labor market. He suggests that the pressure for reform has not yet become sufficiently high. Unlike the economic crisis of the early 2000s, mass unemployment is not currently an issue.
The issue of pension policy drew particular attention from the economists. Fratzscher argues that raising the retirement age is inevitable, stating that “the pension at 70 will come”. He points to countries like Denmark and Japan as examples that longer working lives do not have to equate to sickness or unhappiness, even beyond ages 67 or 70. Holtemöller also considers changes essential, arguing that maintaining the federal budget without making benefit cuts to the pension-the single largest expenditure-is virtually impossible.
Both economists stress the urgent need for significant fiscal consolidation. Holtemöller advocates for a fundamental shift in policy, moving away from broad, blanket subsidies for entire industries and toward targeted support for genuinely needy groups, which can achieve goals more cost-effectively. For example, he argued that instead of subsidizing a theater production, the state should subsidize the patrons who cannot afford admission.
Fratzscher echoed the call to curb spending in other areas. He criticized tax exemptions for items like diesel, company cars, and commuter allowances, calling them subsidies worth billions that disproportionately benefit certain groups and that are neither efficient nor fair.
In addressing the structure of the government’s financing, Holtemöller proposed user fees for infrastructure, such as tolling for highways, citing that digital systems have made this possible.
For the overall economy, Fratzscher concluded that a comprehensive package is essential. This package must involve reducing subsidies, reforming the pension system, increasing taxes on wealth, and simultaneously easing burdens where necessary. He emphasized that everyone must contribute, otherwise, the system will appear to benefit some while forcing others to pay.
When asked if he believed the Chancellor could successfully unite the disparate interests of the coalition into one large reform package, Fratzscher replied that he personally did, but again stressed that the parties themselves do not appear ready to commit.
Fratzscher also noted that social contributions are unlikely to see their required share of gross income decline, advising that raising awareness of the problem is crucial. He warned that without reforms, social contributions could reach 50 percent by the 2030s, up from current rates of 42 percent, which would pose a significant disadvantage to the German economy.
On the repeated topic of the pension age, Fratzscher maintains that raising it is unavoidable, citing international precedent. When considering alternative models, such as variable retirement ages based on job strain, Fratzscher was critical, stating that such systems are often unjust. He pointed out that studies show such models primarily benefit wealthy men with stable career paths, while disadvantages fall on women, those with interrupted work histories, and people with health limitations. Therefore, he believes a single, standardized retirement age is the correct policy.
The journalist questioned why the political system struggles to implement these reforms. Fratzscher’s answer was that while necessary reforms are short-term unpopular, the problem only grows worse the longer they are delayed, making the eventual correction even more painful.
