Heinz, more ammunition to inflate the BUBBLE
German Government, Opposition Seek
Pension Law Accord This Week
By Andreas Cremer
Berlin, May 6 (Bloomberg) -- The German government and
opposition Christian Democrats will this week push for an accord to
promote private pensions, paving the way for tax breaks and
subsidies valued at 21 billion deutsche marks ($9.6 billion).
Chancellor Gerhard Schroeder's government wants to reduce the
burden that shrinking birth rates and rising life expectancy are
placing on Germany's pay-as-you-go pensions system by
encouraging private and company annuity provisions.
Starting Tuesday, a cross-parliamentary panel of mediators will
seek to agree rules for including home-buyers' savings in the range
of retirement investments eligible for tax breaks. A consensus may
tempt some states run by the ruling Social Democrats and
opposition parties to approve the government's plans in the
Bundesrat, or upper house where the states are represented, on
May 11.
``Pension reform will reach the statute book next Friday if both sides
can sort out their differences on the home-buying issue,'' said Stefan
Schwarz, senior analyst at the Bonn-based Institute for Political
Science. ``It's the key sticking-point.''
Overhaul of the country's pensions system is Schroeder's last major
reform project planned before the next elections in the fall of 2002.
Last summer, the government won states' support to push cuts in
corporate and income taxes worth 50 billion marks through
parliament.
Rich Harvest
The government expects as many as 20 million Germans to invest in
private pensions from next year if the law is passed.
Retirement assets in Germany, France, Italy and Spain are forecast
to surge fivefold to $5 trillion by 2010 from $1.2 trillion, Goldman
Sachs Group Inc. estimates.
In Germany alone, banks and insurers are set to reap as much as
550 billion euros ($495 billion) in new business by 2008 if
parliament approves the new rules, according to Morgan Stanley
Dean Witter & Co.
Banks and mutual fund companies such as Deutsche Bank AG are
looking to team up with insurance companies to get a bigger slice of
the market. To better exploit the expected boom in private pensions,
Allianz AG, Europe's No. 2 insurer, in April agreed to pay $20 billion
for the remaining 80 percent of Dresdner Bank AG it didn't already
own.
Negotiators on Thursday brought government and opposition
parties closer to agreement on the issue of how home-owners can
benefit from tax breaks and state subsidies. The Social Democrats'
nine state governors are meeting with Schroeder this weekend,
seeking to narrow differences on pension reform.
For the pension reform to pass into law, Schroeder needs 35 of the
Bundesrat's 69 votes. At present, neither the Social Democrats nor
the main opposition parties can command a majority. Most of
Germany's 16 states represented in the upper house opposed the
plan in February, saying it would inflict excessive bureaucracy and
extra budget costs.
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