Growing internal resistance within the Christian Democratic Union (CDU) is emerging against the German government’s proposed pension reform package. The primary point of contention revolves around the planned suspension of the “sustainability factor” a mechanism that moderates annual pension increases when the ratio of retirees to contributors is unfavorable.
Nicole Hoffmeister-Kraut, Baden-Württemberg’s Minister for Economic Affairs, voiced concerns in an interview with the Frankfurter Allgemeine Zeitung (FAZ), stating that escalating payroll taxes in Germany are burdening businesses and employees, hindering job creation. She argued that reactivating the sustainability factor, or demographic factor, is necessary to achieve a “fairer distribution of burdens between those contributing and those receiving benefits” explicitly advocating for its reinstatement by 2026.
The draft legislation, approved by the Federal Cabinet in early August, intends to disable the factor for the years 2026 to 2031. Without subsequent legislative changes, the factor would automatically resume in 2026.
Pascal Reddig, Chairman of the Young Group within the CDU/CSU parliamentary group, also expressed significant reservations. He highlighted the current allocation of nearly a quarter of the entire federal budget towards pension insurance. He warned that the planned reform package could cumulatively add an additional €200 billion by 2040.
Reddig emphasized that any justification for such increased expenditures requires simultaneous and substantial structural reforms – mentioning the elimination of early retirement incentives and the “fastest possible reintroduction” of the sustainability factor as crucial components.