Streamlining Administrative Procedures and Pension Enhancements: The Coalition's Proposed Agenda
Germany's ruling coalition, comprising the CDU, CSU, and SPD, has declared this autumn as the season of reforms, with a particular focus on modernizing and de-bureaucratizing the social state and revitalizing the economy.
The persistent crisis in Germany's economy, which has seen a shrinkage for the past two years, has sparked a debate about necessary social welfare reforms. Unemployment currently stands at 6.4 percent, and many jobs remain unfilled.
To address these issues, the coalition has constituted a commission called the "Sozialstaatskommission" (Social State Commission). Led by Federal Minister Bรคrbel Bas, this commission is tasked with presenting reform proposals by the end of 2025. The commission's focus is on tax-financed benefits such as housing allowance and child supplement.
One of the proposals expected from the commission is the introduction of an "active pension," aiming to motivate pensioners to continue working through a tax advantage. However, critics argue that this does not solve existing problems and could cost billions.
In terms of economic reforms, leading economic research institutes predict a meager growth of between 0.8 and 1.3 percent by 2026. To boost growth, the contribution assessment ceiling in the general pension insurance is set to increase from 8,050 euros per month to 8,450 euros as of January 1, 2023. Similarly, in the statutory health insurance, the contribution assessment ceiling is set to increase from 5,512.50 euros per month this year to 5,812.50 euros next year.
The coalition agreement offers little concrete detail on social welfare reforms, but the SPD has proposed taxing high earners more heavily, a proposal not mentioned in the coalition agreement. On the other hand, CDU General Secretary Carsten Linnemann has announced a session in the fall dedicated solely to reducing bureaucracy, which is believed to prevent job creation.
The proposals for reforms are not limited to the coalition parties. Green Party leader Franziska Brantner believes significant progress can be achieved through the proposals from the independent norm control council (NKR), including digitization, automation, and bundling in the processing of social benefits.
Existing data between the authorities of the federal government, states, and municipalities should be digitally exchanged, and individual benefits could be bundled, as could the responsibility for them. This move is aimed at streamlining the social welfare system and making it more efficient.
As the autumn reform season approaches, the German government is working diligently to address the challenges facing the economy and social welfare system. The proposed reforms aim to stimulate economic growth, create jobs, and modernize the social state, making it more efficient and less bureaucratic.
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