Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (1769)	3/11/2004 3:45:26 AM
From: Haim R. Branisteanu	Respond to of 116555

German Lawmakers May Approve Schroeder's Pension Cuts (Update1) March 11 (Bloomberg) -- Germany's lower house of parliament may today approve Chancellor Gerhard Schroeder's plans to cut state pension benefits and lengthen the period of contributions in an effort to ease the budget deficit and reduce welfare costs. The proposals mean Germany will limit annual pension increases from next year to prevent companies' and employees' pension contributions, at 19.5 percent of gross pay, from exceeding 22 percent by 2030. The earliest retirement age to qualify for state benefits will rise to 63 by 2008 from 60 now. ``Future retirees can't rely on the system unless the government take steps to fix it,'' said Bernd Karstedt, who helps manage about $117 billion at Union Investment AG in Frankfurt. ``Pension cuts and a higher retirement age are indispensable.'' Spending on pensions is rising faster than any other area of government expenditure, with a third of the 251 billion-euro ($307 billion) budget going to top up the pension fund in 2004. Pensions contributions by workers and employers help make German labor costs higher than the U.S., U.K. or Japan and deter hiring, according to the IW institute in Cologne. Last year, non-wage labor costs rose to 41.7 percent of gross wages from 37.4 percent 10 years ago. Schroeder's coalition of SPD and Green Party holds a nine- seat majority in the lower house of parliament, which is scheduled to vote on the plan at about 2 p.m. Berlin time. ``We are pretty sure of getting the majority we need,'' Wilhelm Schmidt, the Social Democratic Party's parliamentary manager, told reporters at a briefing in Berlin. France and Italy Governments across Europe face mounting pension costs as birth rates dwindle and workers retire earlier and live for longer. Prime Minister Jean-Pierre Raffarin last year defied strikes and rallies to raise the number of years workers pay into French state funds. Italy's biggest unions yesterday announced a strike to pressure the government into shelving plans to cut pensions spending. Each increase of one percentage point in premiums for pensions, health and unemployment insurance costs 100,000 jobs, according to Federal Labor Agency estimates. German unemployment rose for a second month in February to 10.3 percent. Germany's VDR state pensioners' association estimates that retirees today claim benefits for an average of 17 years, compared with 10 years four decades ago. By 2030, there will be no more than two workers contributing to each retiree's pension, compared with four workers for each pensioner four years ago, the VDR says. ``Pension costs have pushed the welfare system to the brink of collapse,'' said Franz Ruland, the VDR's president, in an interview. Resistance to Cuts The bill to be voted on today foresees a reduction in pension payments to 46 percent of a retiree's last net salary by 2020. At present, Germans who retire with 45 years of contributions to retirement pensions receive monthly payouts equal to 53 percent of their last net pay. To win over lawmakers who have resisted cuts in welfare, Schroeder backed down from an early plan to cut the minimum state retirement benefit to 43 percent of a worker's final net income by 2030. Instead, the bill sets the minimum at 46 percent in 2020. Some SPD and Green members voted against the government last year when it put forward plans to make it easier for employers to hire and fire workers and for cutbacks in welfare payments and health-care. While the rebellions were not enough to overturn Schroeder's majority, they forced Schroeder to cede the leadership of the SPD to Franz Muentefering last month. Slumping Support The changes brought in by Schroeder have contributed to a slump in the Social Democrats' support and an exodus of members from the party. The SPD lost last month's state elections in Hamburg, the first of 14 ballots at state, local and European level it faces this year. An opinion survey published yesterday by Forsa indicates Schroeder would lose a national election if one were held now. The main opposition parties, the Christian Democratic Union and the Christian Social Union, would gain a majority in parliament with 49 percent of the vote to the Social Democrats' 25 percent. Once passed, the pensions legislation will come into effect next month. It does not need to be approved by the upper house, where the CDU has a majority which it used last year to hold up approval last year of some of the labor-market, welfare and health- service changes. Last Updated: March 11, 2004 02:50 EST