Berlin The relief was palpable when the leaders of the grand coalition announced an agreement on the basic pension in November after hours of negotiations in the chancellery. “We have tied a big knot,” said CDU chairwoman Annegret Kramp-Karrenbauer. The then provisional SPD leader Malu Dreyer spoke of a “socio-political milestone”. And for CSU boss Markus Söder it was clear: “The cow is off the ice.”
In retrospect, the statements sound extremely optimistic. To stay in the visual language of the Bavarian Prime Minister: The grand coalition is still slipping over a layer of ice that is actually too thin.
On Wednesday, the basic pension will again be discussed in the coalition committee. It is uncertain whether the Federal Government will be able to introduce the new service at the start of 2021 as promised. What is clear, on the other hand, is that the black-red alliance is sinking again in the dispute, despite the compromise.
Because the coalition agreement could not solve the fundamental problems: How can a benefit in the statutory pension be combined with a needs test?
In terms of practical implementation, the compromise raises many questions. Even the otherwise reticent German pension insurance raises the alarm. The financing of the project is still unclear.
There is growing resistance in the Union against the new bill by Social Minister Hubertus Heil (SPD), there is open talk about a shift in the basic pension. The new problems cannot be whitewashed again with compensatory formulations such as in November.
The Union is faced with the decision: does it give in again so that the social democratic basic pension can come? Otherwise the coalition threatens to fail due to one of its central social policy projects.
Scholz is optimistic
The Union now sees above all Labor Minister Heil and Federal Finance Minister Olaf Scholz (SPD) in the duty to save the situation. Last year the coalition committee agreed that the basic pension should be implemented and how it should be implemented.
“This agreement applies, and we stand by it. However, there will be no compromise on this compromise, ”Union fraction leader Ralph Brinkhaus (CDU) told the Handelsblatt. “It is now up to Mr. Heil and Mr. Scholz to present a legislative proposal that implements the agreement from last year.”
The SPD Vice Chancellor is optimistic. “With the basic pension, we are on the home stretch when it comes to clarifying the last technical questions,” Scholz told the Handelsblatt. “Like the Union, we assume that the basic pension will be decided in the cabinet in February.” The basic pension is extremely important for the SPD. It was only after months of struggle that the Union’s Social Democrats managed to wrestle away their basic pension option.
“We Social Democrats have enforced the basic pension. The lifetime achievement for people with low incomes is finally recognized, ”emphasizes SPD parliamentary group leader Rolf Mützenich proudly. “If the Union is honest, then it should be constructively involved in finding good solutions for the implementation of the basic pension. The same applies to the basic pension: where there is a will, there is a way. ”
However, this path is likely to be quite rocky if it exists. Gundula Roßbach pointed this out just a few days after the grand coalition’s compromise in November. The “relatively short period” for the planned implementation of the basic pension until January 1, 2021 is “problematic”, warned the President of the Pension Insurance. The project could mean an “additional requirement of several thousand jobs” in the pension insurance. The top official’s verdict on the administrative burden: “Anything but trivial.” The coalition was therefore warned.
Two socio-political worlds
Politicians have been concerned with the goal of improving long-term low earners with low pension entitlements for some time. At the beginning of 2018, Union and SPD stated on page 92 of their coalition agreement: Those who have paid into the pension fund for at least 35 years, raised children or cared for relatives, should receive a “regular retirement income ten percent above the basic security requirement”. However, under pressure from the CDU and CSU, a means test was written as a prerequisite in the coalition agreement.
The basic problem of the basic pension is therefore already set out in the coalition agreement. Two worlds of the welfare state are mixed: on the one hand there is the pension insurance, the benefits are roughly based on the contributions paid. If the statutory pension entitlements are not sufficient, those affected receive basic security in old age – which practically corresponds to the Hartz IV rate plus accommodation costs.
The state is helping citizens in need based on the principle of care. There is a means test for social assistance. Pension insurance, on the other hand, does not know this instrument.
A working group made up of pension experts recommended Heil to a model in which part of the pension entitlements acquired by low-wage earners in the form of a tax-free allowance are not counted towards basic security.
The Union had also imagined this way. But the Minister of Social Affairs wanted a basic pension “that also deserves the name” and was worth living. So he submitted a draft in which the pension entitlements of long-term low earners were upgraded. Heil initially wanted to do without a means test.
The Union and the SPD fought for months. In the end, they agreed on a compromise that comes very close to the healing concept. The new benefit should be located in the pension insurance and not in the social assistance logic of basic security. Instead of the means test, in which the complete financial situation is examined, there should only be an income test.
Chancellor Angela Merkel (CDU) vigorously campaigned for the basic pension in the Union faction, the resistance led by the economic wing collapsed. At its party conference in December, the CDU made a decision that the compromise should now also be implemented in this way.
Then it got quiet. The only tension was in the Ministry of Social Affairs, which had to forge a new bill from the coalition agreement. Time was of the essence to meet the 2021 deadline.
The Heil design came up with little concern in the early coordination with the Chancellery. Chancellor-in-chief Helge Braun (CDU) called for minor changes. On January 16, the Ministry of Social Affairs sent the draft to the other departments. In contrast to the Chancellery, several Union-led ministries still saw a considerable need for review and opposed the shortened departmental coordination.
How should the basic pension be financed?
In the past week, the opinion of the pension insurance then hit. What chief of authority Roßbach had indicated in November was relentlessly put down on paper by her specialist officials. The socio-political justification in Salvation’s law was “partly contradictory and ambiguous in the objective”.
The project represents an “unprecedented turning point”, the implementation will “extremely burden the pension insurance”. A comprehensive income check cannot be guaranteed. In this way, flat-rate taxed investment income and mini-jobs, and income from abroad could not be taken into account. And the establishment of a data exchange between pension insurance and tax offices is unrealistic by 2021.
The harsh judgment of the competent authority provided new ammunition for the basic pension critics in the Union. But the problem lies deeper than Heil’s draft: The coalition’s intention to combine a pension insurance benefit with a test based on social welfare for the recipients is to square the circle. In addition, the CDU, CSU and SPD have not yet clarified another important question: How should the basic pension be financed?
The coalition compromise stipulates that there must be no increase in contributions. Instead, the basic pension should be paid through a higher subsidy from the federal budget. Vice Chancellor Scholz wants to use the income from the financial transaction tax. The only problem is: the introduction of this tax has been in progress for years, but the participating EU countries have still not reached an agreement. And it is not apparent that anything is changing quickly.
Scholz therefore wants to introduce the financial transaction tax nationally if necessary. The Union rejects that. There is no automatism for a financial transaction tax, said the deputy union group leader Andreas Jung (CDU). “It can only come in the European context of increased cooperation. That’s how it was agreed in the coalition, and it stays that way, ”said Jung. “If Olaf Scholz does not reach a European agreement, he must secure the financing in another way.”
No money with the “watering can”
But even with the financial transaction tax, questions remain unanswered. Scholz anticipates revenues of 1.5 billion euros. The benefits of the basic pension should be around 1.4 billion euros in the introductory year 2021 and then increase to 1.7 billion euros over the years. In addition, according to the pension insurance, “there are likely to be several hundred million euros” in bureaucracy costs for the introduction. Scholz has not yet explained where the money should come from.
In view of the difficult situation and the criticism of pension insurance, the German Trade Union Confederation warns of the failure of the basic pension. “Those responsible in politics and administration should now use all their strength to solve the problems instead of talking them into insurmountable obstacles,” said DGB board member Annelie Buntenbach.
In the meantime, Minister of Labor Heil has postponed referral to the cabinet. Instead of the end of January, the bill is due to be passed in mid-February. “The fact that the SPD is planning a postponement is the admission that Hubertus Heil’s draft law on the basic pension cannot be implemented in this way,” said Union parliamentary group deputy Carsten Linnemann.
And once again emphasizes his fundamental concerns: “Without a real means test, we spend money again with the watering can instead of being there for those who really need our help.”
So there are many questions that should be discussed in the coalition committee next Wednesday. Only if there will be answers will you be skeptical in the coalition.
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