Merkel coalition backs $217bn in German benefits

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Angela Merkel12345 Reuters. German Chancellor Angela Merkel.

Berlin - Chancellor Angela Merkel’s coalition backed a 159 billion-euro ($217 billion) pension package that boosts benefits for mothers and allows retirement at age 63 after a revolt in her Christian Democratic bloc faded.

Pushed through by Merkel and her Social Democrat coalition partner two days before European elections, the bill passed by 460 votes in favour to 64 against in the lower house, or Bundestag, in Berlin today.

Sixty legislators abstained.

The boost in benefits, which the government’s independent council of economic advisers has called a “backward-looking” policy, reflects a deal between Merkel and the Social Democrats that helped bring together her third-term coalition last year.

“This pension package is extremely expensive,” Christian Schulz, an economist at Berenberg Bank in London, said by phone today.

It’s “an expensive mistake for Germany” that fails to take account of an aging population, he said.

Financed initially by the state pension fund, the increased commitments will cost about 10 billion euros a year through 2030, according to the legislation.

Merkel’s government says the benefits, which require upper-house approval, don’t threaten its goal of balanced federal budgets as of next year.

Lawmakers in Merkel’s bloc criticised provisions allowing workers who have contributed to the state system for 45 years to retire at 63, saying a loophole that includes jobless years could trigger a wave of retirements at 61.

Negotiators plugged that gap this week, while Merkel made good on her pledge in last year’s election campaign to increase retirement benefits for women who had children before 1992.

“Both measures are things that the current coalition partners promoted during the campaign,” Merkel said in an interview with the Lausitzer Rundschau newspaper posted on the government’s website today.

“Now we’re implementing them, just as we promised before the election.” - Bloomberg News



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