The government’s proposed reforms to Germany’s welfare system, specifically the “Bürgergeld” (citizen’s allowance), represent a modest step forward but reveal a broader lack of courage for necessary systemic overhauls, according to prominent economic advisor Veronika Grimm. While praising aspects of the adjustments-particularly the government’s apparently renewed resolve on sanctions – Grimm cautions that the changes largely resurrect previously negotiated compromises between the Social Democratic Party (SPD) and the Free Democratic Party (FDP), shelved during the previous legislative period.
Grimm emphasizes that genuine improvement hinges on incentivizing work and ensuring it “pays more” through reductions in benefit withdrawal rates. She acknowledges a potential paradox: if these measures fail to significantly increase workforce participation, the continued need for welfare payments could ultimately prove more expensive, potentially drawing individuals with substantial incomes into the transfer system.
Beyond the “Bürgergeld” reforms, Grimm’s critique sharpens considerably. She argues that the same political reluctance is evident in other crucial areas, most notably pensions. The coalition’s insistence on maintaining the existing pension level, coupled with expansions of the mothers’ pension and the introduction of “active pensions” carrying tax relief, represents a trajectory of unsustainable spending. She estimates these measures will result in a “three-digit billion euro” burden within the medium term, potentially exceeding 200 billion euros if reforms are delayed until the 2030s.
Grimm’s concern is not merely fiscal but strategic. She asserts that the government is failing to adequately account for the evolving economic realities, creating a situation where unrealistic benefit promises will drastically curtail the budget’s flexibility for future-oriented investments. This, she warns, almost guarantees the continued reliance on debt-fueled spending to cover immediate needs, ultimately jeopardizing Germany’s long-term economic health and future competitiveness. The current policy choices, Grimm suggests, demonstrate a prioritization of short-term political expediency over prudent economic planning.