Germany to let some workers retire younger in a move that goes against the grain of recent changes in retirement policy - General

thenews 2014.05.19 19:32 #981

Germany to let some workers retire younger

In a move that goes against the grain of recent changes in retirement policy, the government of Chancellor Angela Merkel today approved a deal that would allow some German workers to retire with full benefits at age 63, Reuters reported. The new policy, expected to be formally voted into law later this week, partially reverses reforms instituted in 2007 – also under Merkel – that increased Germany’s baseline retirement age from 65 to 67.

The move comes at a time when budgetary pressures have been pushing most industrialized nations to raise their official retirement age. While Germany’s long-term government finances are in better shape than those of most of its peers, Germany also has one of the world’s oldest populations – the median age, at 45, is higher than in any other EU country, and Germany’s elderly-to-working-age population ratio is also on the high side, as Stefan Wagstyl noted in a recent analysis in the Financial Times (registration required).

Starting in July, Germans who have worked and contributed to the government pension system for at least 45 years will be able to retire with full benefits at age 63. The government has estimated that about 50,000 workers will take advantage of the change in its first year. The compromise also increases pension payments for the parents of children born before 1992; in Germany’s system, stay-at-home parents can earn some pension credits.

Critics of higher retirement ages have raised the point that they penalize people who perform physical labor or have other jobs that are hard to sustain into your 60s. Merkel’s plan partly addresses that critique, since it makes early retirement available only to those who enter the workforce early, at an age when “knowledge workers” would be more likely to be earning a degree than earning a paycheck.

Merkel’s government has estimated its reforms will cost about 1 billion euros ($1.37 billion) this year and 5.2 billion euros a year by 2030. European deficit hawks, including dissenting members of Merkel’s own Christian Democratic Union (CDU) party, have argued that those are lowball estimates and that the change could cause serious budget problems for Germany down the road.

Political considerations may be outweighing fiscal ones, however: As Wagstyl notes, in the most recent German election, 36% of all voters, and 43% of those who voted for the CDU, were over age 60.

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thenews 2014.05.20 05:14 #982

German Producer Price Inflation -0.1% vs. 0.1% forecast

Germany’s producer price index fell unexpectedly last month, official data showed on Tuesday.

In a report, Destatis said that German Producer Price Inflation fell to a seasonally adjusted annual rate of -0.1%, from -0.3% in the preceding month.

Analysts had expected German Producer Price Inflation to rise 0.1% last month.

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thenews 2014.05.20 07:45 #983

Swiss Face Conundrum as ECB Signals Further Stimulus

Swiss policy makers are under increasing pressure to come up with a contingency plan to curb gains in the franc that would likely result from a fresh round of stimulus from the European Central Bank next month.

The Swiss National Bank already has a zero interest-rate policy, in part to keep the nation’s currency from rising beyond the 1.20 franc-per-euro cap in place since 2011. It would need to take steps to defend that level if the ECB cut rates or broadened asset purchases, according to 52 percent of respondents to a Bloomberg News survey this month.

“The SNB could face a conundrum,” David Tinsley, an economist at BNP Paribas SA in London, said yesterday in a phone interview. “In the event a negative deposit rate from the ECB produces more pressure on the franc to appreciate, the question is, what would the SNB do about it?”

A measure of anticipated price swings in the franc jumped the most of 15 major peers in the past week, suggesting traders are focusing on the Swiss currency ahead of the ECB’s June 5 policy meeting. International economist Nouriel Roubini said officials would consider lowering the ceiling to weaken the currency if needed.

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