Controversy Over Rising Retirement Age Heats up in Germany

Earlier this month, Labor Minister Franz Müntefering announced that the phase-in period of the new retirement age -- in an effort to secure Germany's creaking state pension system -- would be completed in 2029 rather than 2035 as previously planned.

The move does not sit well with members of Müntefering's Social Democratic Party such as Karl Franz, the head of the workers' council at the Eisenach plant of German car maker Opel.

Franz said working on the plant's assembly line beyond the age of 50 is impossible: The job is so physically demanding that only younger workers can keep doing it.

"Opel has invested a lot in a healthy job environment in order to keep workers employed longer than in the past," he said. "But working under such intense conditions until the age of 67 is an abolute illusion."

In recent years, Opel has sent most of its older workers on early retirement, paying out generous compensation to tide its workers over the period until full retirement at 65.

Throwing the system out of balance

The method, however, has come under the criticism of Müntefering. Shedding older workers well before retirement age is one reason why Germany's statutory pensions system has been thrown out of balance, the minister says.

The other one is that people become much older thus enjoying their pensions for much longer than in the past. According to Müntefering, the German pay-as-you-go pension system is bound to collapse if the current situation goes on like this.

"Primary school arithmetic is enough to understand why we have to act," he said. "Those who deny this ignore the realities of the present day."

Ignoring realities?

But Müntefering himself stands accused of ignoring realities. Critics, even from within his own Social Democrats, say it's impossible to keep hard-working roof layers, miners or factory workers toiling until 67.

Kurt Beck, SPD premier in the state of Rhineland-Palatinate and up for re-election this year, demands the government allows exceptions to the rule.

"The realities of life must be taken account of by allowing people who have worked 45 years to be able to continue to retire in the future at 65 years of age," he said. "In addition we should find ways of subsidizing pensions for people in physically demanding jobs who are unable to work until 67."

So far, however, the government is resisting calls for exceptions for specific professions.

Employers are hopeful

Germany's powerful trade unions argue it's been the government's intention all along to use the increase in the retirement age to force unemployed elderly people into early retirement on reduced pension rates in order to save millions in state contributions to the creaking system.

Last year the government paid out 78 billion euros ($93.4 billion), about 30 percent of government expenditure, to shore up the pensions system.

But while workers are unhappy, German employers generally welcome the rise in retirement age. They hope the move will lower non-wage labor costs: Pensions contributions make up almost 20 percent of non-wage labor costs and are shared equally between employers and

employees.