Europeans say a benefits system for the elderly is no longer sustainable.

BERLIN (AP) – As part of the generation that rebuilt Germany from the ruins of World War II, Annelies Fiedler never thought she’d see the day her old-age comforts would be questioned.

But as Germany struggles to reduce public spending, generous retirement benefits long taken for granted are being openly debated -even crudely when a member of the Christian Democrat youth organization this summer publicly said taxpayers should not have to pay for hip replacements for the elderly.

While governments in France, Austria and Italy also are discussing ways to curb pension spending, in Germany the debate is becoming a battle of the generations: Worried youth challenging older generations to abandon some benefits now to keep the system from collapsing.

The suggestion to sacrifice again in their golden years is particularly distasteful to those whose hard work in the decades after the Nazi defeat helped ensure Germany’s generous welfare state.

Germany’s main cities, including the capital Berlin, the financial center of Frankfurt and industrial cities like Cologne, were leveled by allied bombing. Ordinary Germans joined the overwhelming task of rebuilding, helping remove the rubble stone by stone and later lending their brawn to reviving industry – setting Germany on the road to the “economic miracle” of the 1960s.

“That shouldn’t be changed,” says Fiedler, 77, who trained as a tailor and worked as a saleswoman for West Berlin’s landmark KaDeWe department store for decades. “This new generation has grown up well-off. We had to work hard for what we achieved.”

“Young people don’t have any goals any more,” Fiedler says. “We had goals – we wanted to get out of the ruins, we wanted to rebuilt, we wanted our own apartments and families. We wanted to be able to offer our children something.”

Last month, Chancellor Gerhard Schroeder’s government, desperate to plug a funding shortfall and start addressing the challenges of an aging population, decided on what amounts to postwar Germany’s first pension cut.

It was a first thrust against the so-called “contract between the generations” that has seen well-off workers finance old-age comforts for the generation that restored the country as an economic power.

“The old treaty between the generations has become invalid,” argues Hendrik Wuest, 28, who sits on the leadership board of the main opposition Christian Democrats. “The generation that will retire in the next few years had too few children, and it is no longer reasonable for our generation to finance pensions and health care under the old conditions.”

As it stands, nearly one-tenth of a German employee’s gross salary is gobbled by the pension system.

Workers contribute half of a mandatory payroll levy that funds pensions, with their employer paying the other half. Last month, Schroeder left the levy unchanged at 19.5 percent, steering clear of burdening an already stagnant economy.

However, the levy was hiked from 19.1 percent a year ago, and there’s little prospect of it dropping.

Schroeder has vowed to roll back early retirement, raising the average retirement age to 63 by 2008.

“People who are aged 70-80 today carried a double burden – they worked hard and they had children,” Wuest says. “But people who are going into early retirement today in their late 50s or around 60 often haven’t done that.”

But Wuest played down comments this summer by a colleague who heads the opposition’s youth wing, 23-year-old Philipp Missfelder, who drew fire from across the political spectrum for suggesting the retired were receiving too many benefits.

“I don’t agree with 85-year-olds getting artificial hips at the cost of the community,” Missfelder said. “It sounds harsh but that’s the way it is: People used to go around with crutches.”

Still, Missfelder said he’d be prepared to make a sacrifice of his own, retiring “late, maybe at 70.”

“If you have a rising life expectancy, you can work longer than previous generations,” he added.

Schroeder, however, stopped short of raising the retirement age to 67, as recommended this year by a government-appointed panel. He acknowledged that the increase may need to be considered after 2010.

Embroiled in a wider-ranging and unpopular effort to trim generous welfare benefits and slim down rigid labor rules, the chancellor is finding little such readiness to change for the greater good and a leaner, fitter economy.

“There is an unbelievable level of agreement that we need reforms,” Schroeder said in a recent speech. “But equally – and this is the problem – there’s an unbelievable gulf between that abstract approval and the lack of enthusiasm when people are affected themselves.”

More than 100,000 protesters took to the streets of Berlin this month to protest the reforms in the largest demonstration over Schroeder’s economic reforms seen in normally placid Germany.

Howls of protest have accompanied moves to slash tax breaks for homebuilders and commuters.

Retiree Fiedler isn’t impressed with Schroeder’s latest moves to freeze pensions next year and hike nursing-care insurance fees for the elderly. Combined with a health-care package aimed at making Germans pay more of their own costs, she reckons they will shave about $69 off her monthly income of $1,600.

“That’s still a lot of money for me,” she said, even though she receives more than the average pension of about $1,250 a month.

Hans-Werner Sinn, one of Germany’s leading economists, estimates that while each retiree is currently financed by four workers, by 2050 there will only be only two employees per retiree.

Of Germany’s 82.5 million people, 24 percent already are aged 60 or over. By 2050, the government projects, that figure will rise to 37 percent; and starting in 2005, it will factor the aging population into annual decisions on pension rises that until now were linked to the average level of wage rises.

“We Germans have not yet grasped how dramatic this issue is,” said Sinn, the head of the Ifo economic think tank, who says World War II casualties pushed down the number of pensioners over recent decades.

“Employees have it doubly good now – we have to finance few elderly people and we also finance very few children,” he added. “This is going to change dramatically … we’ll need fairly radical changes to the system that go far beyond what is on the agenda now.”

AP-ES-11-28-03 0343EST



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