The President of the Ifo Institute, Clemens Fuest, has delivered a mixed assessment of Chancellor Friedrich Merz’s economic and financial policy record.
In a commentary for the Handelsblatt, Fuest highlighted a series of government decisions that, in his view, have failed to effectively curb spending or foster economic growth. He specifically cited the expansion of the parental allowance and, more critically, the early retirement scheme, deeming the latter an inefficient measure contributing to bureaucracy and dispersing funds to individuals who do not require them. The critique comes ahead of the Chancellor’s annual summer press conference in Berlin.
Fuest is urging the government to undertake reforms of both the pension system and the healthcare sector, prioritizing measures that will moderate the rate of expenditure growth relative to wage increases. He further advocates for increasing labor force participation among older individuals beyond the age of 63, arguing this would bolster pension system revenue while simultaneously reducing outlays.
The economist concludes by stressing the necessity of aligning pension increases with wage growth, a principle which should extend to public sector pensions as well.
