Europe needs a ‘quantum leap’ in economic integration, warns Merkel
Cabinet agrees to let German workers retire at 63 without penalties
German chancellor Angela Merkel, who is on crutches following a skiing accident, in Berlin yesterday, where she told German MPs “stronger European institutions” are essential. Photograph: Seán Gallup/Getty Images
German chancellor Angela Merkel has warned that Europe still needs a “quantum leap” in further economic integration if it wants to put the euro crisis behind it for good.
In an hour-long speech to the Bundestag yesterday, she defended her third term government’s much-criticised pension reform, annual estimated cost €11 billion, and made some critical swipes at the US in the ongoing NSA spy affair. Her political compass, Dr Merkel insisted, remained Germany’s postwar social market economy which, as she put it, “puts people at the heart of politics”.
On Europe she covered familiar ground: that it was in Germany’s interest to have a strong Europe but that Berlin would not shy away from bringing its “values and interests” into the debate.
“We have a currency union with continued weak economic co-ordination. Without decisive progress, without a quantum leap, we will not overcome the European debt crisis,” she said, flagging treaty change and “stronger European institutions” as essential parts of the transformation process.
Of greater interest to her domestic audience yesterday, however, was her grand coalition’s delivery yesterday on its biggest election promise – pensions.
Dr Merkel’s CDU won last September’s election promising to end a two-tier system that gave stay-at-home mothers in the last 20 years greater pension entitlements than older women.
The Social Democrats (SPD), meanwhile, vowed to allow workers retire without penalties at 63 after 45 working years. The new cabinet agreed yesterday to implement both, as well as new measures for a minimum wage of €8.50 next year and a crackdown on contract workers.
Ex-chancellor Gerhard Schröder said this gave “the completely wrong signal to German neighbours , given the reforms we are – correctly – demanding from our European partners”.
“These decisions don’t just cost a few billion euro, the spending recurs every year and will raise the question in a few years,” he said. “There are too few workers in Germany paying for an increasingly large group of pensioners.”
But Andrea Nahles, Germany’s new labour minister, dismissed Mr Schröder’s concerns. “We want to make clear that we recognise the contribution made by people who raised children or worked hard for many years,” she said. “This is not a gift, this was hard-earned.”
Charities, unions and employers were united in their criticism of the pension reform. They call it expensive clientialism by the CDU and SPD towards Germany’s growing army of pensioner voters.
Charities warn that the retirement age of 63 will be a boon to skilled workers, who may choose two-years of unemployment leave at 61, but does little to address growing old-age poverty among unskilled workers.
The opposition Left Party, meanwhile, criticises the pension reforms for retaining lower entitlements for eastern German workers and mothers.
Dr Merkel saved her most direct language for the NSA spying affair, which touched on surveillance of her own mobile phone conversations. Berlin’s relationship with Washington remained close, she said, but the revelations raised uncomfortable questions about how allies co-operate.
“Trust is the basis of co-operation between partner states [but] an approach where . . . everything is done that is technically possible damages trust,” she said. “At the end you have not more but less security.”