“Pensions are safe”, former German labour secretary Norbert Blüm promised during the 1986 electoral campaign. Thirty-five years later, the future of Germany’s public pension scheme plays an important role in political campaigns once again. This article considers what today’s main political parties are now offering to the German electorate.
Public spending
Edmund Burke once said that “No government ought to exist for the purpose of checking the prosperity of its people or to allow such a principle in its policy”. In contrast to this principle, however, in June and July finance ministers and central bankers met in London and Venice to check the prosperity of “their” peoples and of the entire planet by proposing a universal corporate tax rate of at least 15%. According to media reports, the words “at least” were added on the insistence of the EU ministers.
Pundits from all quarters harshly criticized the German Federal Constitutional Court of Karlsruhe after its judgment of last 5 May 2020.
The Court raised constitutional complaints in regard to the Bundesbank’s approval of the European Central Bank (ECB)’s Public Sector Purchase Programme (PSPP). According to the Court, PSPP potentially violated the principle of proportionality, and thus jeopardized the ability of the ECB (and thus of the Bundesbank) to achieve its price stability mandate. In June 2020, the ECB provided the Karlsruhe Court with documents including detailed considerations on proportionality behind PSPP. Even though these documents met the requirements of the Karlsruhe Court, the ECB will nonetheless be forced to consider the issue of proportionality much more carefully when purchasing government bonds in the future.
Germany introduced the so-called ‘bureaucracy brake’ in January 2015. Whenever new legislation is passed, the ‘one-in-one-out’ principle applies: it obliges the bureaucracy to eliminate old regulation whenever new rules are introduced, to avoid that that regulatory layers multiply and the burden for businesses increases. Since 2015, bureaucratic requirements actually decreased, and shows the German government does intend to cut red tape. Yet, it could do more. For example, the “bureaucracy brake” does not apply to EU guidelines and regulations; it ignores the cost of changing the rules; and leaves the size of the bureaucratic apparatus untouched.
Populism Italian Style and some bizarre ideas about representative democracy came to an end when prime minister Giuseppe Conte resigned and Mario Draghi took his place. Draghi has become a national hero and people have been changing their minds. They no longer trust that bombastic stories could replace lack of content, and that MPs can be appropriately selected through a fanciful internet-based contest where candidates would flaunt their qualities and air their promises.
In a new IREF Working Paper Stefano Adamo of the University of Banja Luka turns to a young genre of Italian literature. Adamo analyzes four novels that revolve around the financial crises of the year 2008 and the government debt crises of the 2010s. What is special is that the authors of the novels can look back at a career in finance. As insiders they can illustrate processes within banks and on financial markets in Italy from first hand experience. In the working paper, Adamo unpacks in detail how the authors depict the financial industry. The industry as well as its protagonists do not fare well. According to the authors, the world of finance is populated by irrational, overly risk-loving individuals. Many of them are questionably entangled with politics. In a sentence, all the novels contain a strong plea for more regulation.
Young people’s attitudes towards retirement are contradictory: on the one hand, they don’t trust public pay-as-you-go pensions. According to recent surveys, around half of the respondents do not expect significant retirement income from this source. On the other hand, private efforts are insufficient to close the expected pensions gap.
As a reaction to COVID-19, governments are making extensive financial aid available. However, beyond helping out households and companies in need, aid also attracts opportunists. Because of this, the OSCE is expecting corruption to increase. Yet, this danger differs across countries, even within Europe, where corruption is less problematic than in other regions. In Scandinavian countries, corruption within the civil service affects people’s lives very mildly. In some countries of Eastern and Southern Europe, the situation is more complex but not hopeless, as shown by recent encouraging developments in a number of countries, e.g. Estonia.