The German economy is growing at full speed, but leading economists in the country have warned that the air “is getting thin.” In addition to the risk of a trade war with the US, two dangers have been worrying experts in recent months: the lack of qualified labor and uncertainty concerning the welfare system. These issues are related to the population crisis, analysts say.

Lift the age of retirement or take in migrants

Experts say the plans of Germany’s coalition government are unsustainable. They argue that there are two possible solutions: lift the retirement age in Germany to 70, or take in 500,000 migrants a year, in order to increase the number of people paying social security contributions. The government wants to maintain pension payments at at least 48% of the net average wage, allowing social security contributions to rise by no more than 20% over the next few decades. However experts say under current rules, pensions will drop to 43% by 2050 due to population ageing.

Business confidence in Germany has dropped along with the number of workers
Business confidence in Germany has dropped along with the number of workers

In addition, German stock market regulator Bafin has said company insurance funds are running dry, according to the newspaper Bild. “One in three are struggling,” the tabloid reports. The situation is “more serious than two years ago,” according to Bafin. “Without additional resources, some (of these companies) will no longer be able to fully guarantee their services,” it added. The problem comes against the backdrop of low taxes, which have a negative impact on the whole system.

Lack of manpower

Experts say that labor is lacking in the manufacturing, construction and services industries. Over the last five months, this factor has led to a progressive drop in business confidence in Germany. However, the overall context remains positive, to the extent that economists have revised upwards GDP estimates with respect to last autumn. Unemployment will continue to fall and growth in 2018 is expected to be 2.2% (revised upwards from 2%), and in 2019 2% (revised upwards from 1.8%).


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