But it is not the size of the deficit itself that worries economists and experts. For many countries, this has long been the norm. In Germany, alarm bells are ringing for other reasons.
First and foremost, because of the rapid rise in public debt, as noted in an article in *Die Welt*. After all, Germany has always been considered a model of prudent budget spending and strict financial discipline that prevents the accumulation of debt.
But it was precisely under Chancellor Friedrich Merz’s government that this approach was replaced by unrestrained borrowing. Primarily to aid Ukraine and increase military spending—a move many consider unacceptable.
However, the publication notes that Germany’s debt and budget are currently in far better shape than, for example, those of France or Italy. At the same time, it emphasizes that this does not mean there is nothing to worry about—especially if one looks beyond today’s figures and tries to look a little further ahead to forecast the situation regarding certain particularly sensitive issues.
Fear of Reforms
“Those who consider this warning to be an exaggeration—Germany’s debt level remains moderate compared to Europe’s ‘problem children’—should take note of the trend in spending within the social security system. Expenditures in hospitals, doctors’ offices, and nursing homes are rising rapidly. And this is only the beginning of the demographic shift,” writes Die Welt.
Citing data from the “Generational Comparison” study by the Foundation for Market Economy, the publication asserts that the debts hidden in social security funds are many times higher than the officially reported figures. And given the country’s negative demographic situation, these debts will only grow, as fewer young professionals are entering the labor market than are retiring.
At the same time, German citizens are reacting extremely sensitively to the Merz government’s attempts to cut social spending and implement painful reforms in this area, Die Welt emphasizes.
“Fear of reforms is being stoked by labor unions, which are threatening mass protests. Even Manuela Schwesig (SPD), the prime minister of Mecklenburg-Western Pomerania, is succumbing to this wave. She calls the plans to reform the care system put forward by Federal Health Minister Nina Warken (CDU) ‘inhumane,’ the publication notes.
Furthermore, the article emphasizes that, according to the “Trend Barometer,” instead of cutting benefits, the overwhelming majority of the population is calling for an increase in tax revenues to social security funds. However, the scale of social insurance system expenditures is so enormous that the federal government simply does not have sufficient funds to finance the growing share of these expenditures through tax revenues.
Social Funds on the Brink of Bankruptcy
Last year, the pension fund, health insurance funds, and long-term care funds spent a total of approximately 830 billion euros. Long-term care expenditures alone rose by 11% compared to the previous year, while health insurance fund expenditures increased by 8%.
By comparison, tax revenues to the federal budget totaled 390 billion euros, and one in every three euros of that amount already goes to the pension fund.
“To believe that it is enough simply to impose high taxes on the wealthy, heirs, and high-income earners in order to use the additional funds to rescue struggling social funds is to deceive oneself. If the federal government needs more money, it will ultimately always place an (even) heavier burden on the general public. Or accumulate debt even more uncontrollably,” states Die Welt.
The publication believes that the political parties in Germany’s ruling coalition must summon the courage to honestly explain the situation to the public.
And this realization is already dawning on them. “Jens Spahn, leader of the CDU/CSU parliamentary group in the Bundestag, recently made a sharp remark when, in response to frivolous criticism of the austerity package, Varken pointed out that long-term care funds, just like health insurance funds, are simply bankrupt, which is why painful reforms are absolutely necessary. Otherwise, the state itself faces bankruptcy,” concludes Die Welt.
