>Lieber Dennis,
>
>exactly, details matter. But lets first look at the big picture. Through the
>auctions of the UMTS cellular phone licenses the finance minister got an
>additional 100 billion Deutschmarks this month. Instead of demanding the
>whole sum is spend for education, environment or social issues it is agreed
>by all the monetarists in government only the interests (5 billion) from
>this amount is to be spent. Some Greens even want to use this money to buy
>back more bonds.
>
>Now for the details: Its mostly social-democrats that want to spend the
>money. Mainly to raise the amount given to families with children.
>Furthermore investing into the rail system and more money for universities
>is demanded.
>
>In the whole discussion its the Greens that have taken the traditional role
>of the FDP demanding 'budget discipline'.
***** Financial Times (London) July 14, 2000, Friday London Edition 2 SECTION: WORLD NEWS - EUROPE; Pg. 8 HEADLINE: WORLD NEWS - EUROPE: Pensions threaten German budget BYLINE: By RALPH ATKINS
Germany's failure to reform its expensive state pension system threatens to throw off course the budget consolidation plans of Hans Eichel, finance minister, according to a paper drawn up by finance experts in the Green party, junior members of the Berlin coalition.
The exploding costs of an ageing population mean the sums the federal government injects into the pension system will account for almost a third of federal tax revenues by 2004, warns Oswald Metzger, finance spokesman in the Greens' parliamentary party.
Failure to reform the pension system, or a further watering-down of proposals put forward by Walter Riester, labour minister, would force the federal government to contribute still greater sums. That could dash Mr Eichel's hopes of balancing the federal budget by 2006, Mr Metzger argues.
Mr Metzger's paper highlights the costs of failing to reform the pay-as-you-go pension system. Mr Riester wants to supplement the system by encouraging the young to invest up to 4 per cent of gross wages in private or occupational schemes - in addition to paying into the state system.
But he has failed so far to win backing from the opposition Christian Democrat Union, which wants stronger assurances on future state pension levels. CDU support is needed to win parliamentary approval for related tax changes.
The stalemate comes despite Mr Riester responding to pressure from the CDU and trade unions and pledging that state pensions would not fall below 64 per cent of average net wages until at least 2030, compared with the present 70 per cent.
The federal government is already contributing more than DM100bn (Pounds 32bn) annually to the state pension system. Its contribution is intended primarily to accommodate burdens such as the additional numbers imposed by German reunification or to supplement pension contributions for those with children.
But Mr Metzger points out that the federal injections are growing much faster than these additional costs, and are "functioning increasingly as a guarantee for the state pension system in the face of structural changes in the population".... *****
Yoshie