Challenges of an Ageing Society for the Fiscal Sustainability The German Perspective Werner Ebert German Federal Ministry of Finance DG Fiscal and International.

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Presentation transcript:

Challenges of an Ageing Society for the Fiscal Sustainability The German Perspective Werner Ebert German Federal Ministry of Finance DG Fiscal and International Affairs Ljiubliana, 22 June 2016

Old-age dependency ratio rising – soon and rapidly Source: UN World Population Prospects: The 2015 Revision. *Euro area: year 2013, EPC Ageing Report 2015 ratio of population 65+ per 100 population Korea18,065,8 USA22,336,9 China13,046,7 Germany32,258,6 France30,646,3 Italy35,167,6 Japan43,370,9 Euro area*29,352,0 2

The Demographic Pressure: Gloomy Growth Perspectives for Germany 3

Demography: Deep Impact on Fiscal Sustainability Dramatic fiscal impact  All layers of social security system affected  Impact on public budgets of Federation, Laender, municipalities Early Warning Mechanism necessary  Focus on ageing-induced fiscal risks up to 2060  Indicating necessary structural reform agenda MoF “Report on the Sustainability of Public Finances”  Once per legislative period  New report presented to Cabinet on 17th February 2016 Fiscal Sustainability Reporting Framework on EU Level 4

Ageing Cost Dynamics Source: EPC Ageing Report 2015, OECD, IMF 5

Basic FSR result: dramatic public debt dynamics 6

Risks and Chances: HC and LTC as a „time bomb“ 7

Very uncertain: the budgetary effects of refugee migration 8

Impact of Reforms: Crucial Factors for Improving Fiscal Sustainability Quelle: Bundesfinanzministerium 2016, Werding

Current policy debate on „linking statutory pension age to life expectancy “ 10

The Reform Debate in Germany Extending Working Live –Incentives for increasing effective retirment –Linking statutory retirement age to life expectancy –Fiscal Impact: Reduction of FSG Pension adequacy –What about low income groups? Occupational/privately funded schemes –Low income groups and SMEs in the focus –Coverage to be extended (financial incentives, transparency) –Opt-out model –Low interest environment as a constraint 11

Thank you Further details: MoF-Homepage / English translation of the report forthcoming 12