A leading economist at the Munich-based Ifo Institute, Clemens Fuest, has expressed support for the potential elimination of the parental allowance in the upcoming coalition negotiations. “I would completely abolish the parental allowance. It’s a classic case of ‘nice to have, but not a priority'” Fuest told the Welt am Sonntag.
Many recipients of the allowance are financially well-off, Fuest said, raising the question of need. “With all state benefits, one must check whether they have a targeted effect” he said, addressing the Union and SPD. As there are always arguments for retaining subsidies, one could opt for a blanket solution, Fuest added. “If one does not want to engage in detailed discussions, one can employ the lawnmower method: a general reduction of, for example, 50 percent.”
The federal budget allocates around eight billion euros annually for the parental allowance. Reint Gropp, president of the Leibniz Institute of Economic Research in Halle, considers it “difficult but necessary” to eliminate subsidies. The government should not shy away from revoking relief measures, he said. “The commuter allowance, for example, is simply a relic of the past. The state can no longer subsidize people living as far away from their workplaces as possible” he added.
The next government must take on the steadily increasing contributions to the statutory pension insurance, Gropp said. “A pension reform is long overdue. If we continue to write off the retirement level, the non-wage labor costs will become unmanageable” he said.
Monika Schnitzer, chair of the Council of Economic Advisers, calls on the parties to develop a long-term budget strategy. “Even the elimination of subsidies requires some lead time, so that those affected can adapt” she said. Schnitzer noted that, even with the five billion euros in new credits allowed despite the debt brake, “the necessary defense spending and investments in infrastructure and the promised tax reliefs cannot be financed.”
However, she opposes a renewed suspension of the debt brake, saying that the necessary emergency must be unforeseen and not self-inflicted. “The Ukraine war has been going on for three years and the reorganization of transatlantic relations under Trump has yet to have concrete effects that could be described as an emergency” she said. Schnitzer sees a fundamental reform of the debt brake as the “most sustainable and best way.