Future pension expenditure as a percentage of GDP in Germany lower than in 2000.

Every three years, as part of the European Union's (EU) fiscal policy monitoring mechanisms, the Economic and Financial Affairs Council (ECOFIN) analyses the fiscal risks associated with an ageing society. The current report projects an increase in public healthcare, long-term care and old-age provision of 1.6 percentage points for the EU and 1.8 percentage points for Germany by 2070. Compared to the last report dated 2021, the age-related fiscal risks in the EU will decrease by half a percentage point and in Germany by one percentage point. In Germany, this decline is primarily due to the lower increase in future public pension expenditure.

Finance ministers focus on social policy

In the EU, social policy is the responsibility of the member states. However, the social insurances are parafisci - that is: The income and expenditure of the statutory social insurance is part of public finances, they are therefore at the centre of European economic policy management, which is aimed, among other things, at sustainable public finances in the medium and long term. Since the Maastricht Treaty in 1992, economic governance in the EU has been a cornerstone of economic and monetary union. It has been continuously developed and intensified, particularly as a result of the economic and financial crisis. Most recently, on 29th April, the ECOFIN Council adopted the reform of the budget rules. In this context, the importance of projections of the long-term sustainability of public finances has also increased significantly at European level in recent years. This particularly applies to the budgets of the statutory social insurance institutions and their future development.

Ageing society

The report is based on the population projections of the EU Statistical Office (Eurostat). According to the report, the old-age dependency ratio, i.e. the ratio of 65 year-olds and older to 20 to 64 year-olds, will increase by 23 percentage points in the EU by 2070. An increase of 17.6 percentage points is calculated for Germany.

Pension expenditure remains below the level of 2000

In the latest report, the increase in the future cost burden for public pension expenditure in Germany has decreased significantly compared to the last report. Public expenditure on pensions as a percentage of gross domestic product (GDP) is currently projected to rise by 1.2 percentage points from 10.2 per cent at present to 11.4 per cent in 2070. In the previous report published in 2021, an increase to 12.4 per cent in 2070 was calculated. According to the current projection, the share of pension expenditure in GDP in 2070 would be lower than in 2000. At that time, public pension expenditure accounted for 11.8 per cent of GDP.

Healthcare expenditure remains stable

According to the European report, the ageing of society will have virtually no impact on future public healthcare expenditure in Germany. The projected age-related increase up to 2070 is 0.1 percentage points (EU: 0.4 percentage points). The situation in the care sector is different. An increase of 0.5 percentage points is projected for Germany (EU: 0.8 percentage points).