D:The Federal Ministry of Finance warns of a sharp increase in public debt in the long term. The combination of economic weakness and the progressive aging of the population could lead to public debt multiplying to 345 percent of gross domestic product by 2070, according to the current sustainability report presented by the ministry on Wednesday.
Such an increase should be expected “in the event of an adverse scenario,” the FDP-led ministry said in a newspaper. In the case of a “favorable scenario”, the public debt can increase from the current 64 percent to 140 percent of the gross domestic product. The budget deficit may reach 2.67 percent of the gross domestic product in favorable conditions by 2070, and up to 6.93 percent in unfavorable conditions.
Federal Finance Minister Christian Lindner (FDP) saw the findings as “a call to politicians to initiate structural reforms in all relevant policy areas”. The current structure of pension, health and nursing care insurance is “unsustainable in its current form in the long term”. FDP budget expert Christoph Meyer called on the coalition partners to show readiness to reform. “The sustainability report shows that without strong economic growth, the lavish welfare state will no longer be able to finance itself in the future,” he explained.
The report comes out only every four years
With the report on the stability of public finances, the Federal Ministry of Finance provides information on the long-term development of public finances, usually once per legislative period. The last report was submitted in 2020. According to the ministry, the forecast is intended as “an important early warning mechanism for forward-looking financial policy.” The 2024 report focuses on the demographic challenges facing public finances in the future. “We already see that the decline in the number of the working population is accompanied by the increase in the number of pensioners,” the newspaper notes.
Accordingly, the demographic costs of the government will increase. “under unfavorable conditions”, from 27.3 percent of gross domestic product in 2022 to 36.1 percent in 2070. In “favorable conditions” the growth can be 30.8 percent of the gross domestic product, limit the year 2070. . In particular, higher immigration and lower unemployment “will have a positive effect on the long-term sustainability of public finances,” writes the Federal Ministry of Finance. A stronger increase in the labor market participation of the elderly and a greater increase in the labor market participation of women will also have a positive effect.
In the report, the ministry gives a forecast of the development of the number of employees, which will probably be very different in East and West Germany. With “moderate developments in birth rates, life expectancy and net immigration,” the number of people employed will fall by twelve percent nationwide between 2022 and 2070, by 11 percent in the West German states and by 21 percent in East Germany. the states. Berlin will therefore be the only federal state expected to increase its labor force over the entire period until 2070 (plus 5 percent). However, the ministry notes that these forecasts are subject to great uncertainty.