Germany’s budget reveals heavy focus on pensions over public investment
A new study has revealed how Germany allocates its government spending compared to other European nations. The findings show a heavy focus on pensions and social security, while investment in public services remains low. Researchers at the Cologne Institute for Economic Research (IW) published the data as political parties prepare for pension reform talks.
The report highlights that 41% of Germany’s total government expenditure goes to social security, with nearly half of that budget allocated to old-age pensions. Germany’s spending on healthcare matches that of the Nordic and Benelux regions, with 16% of total expenditure dedicated to it. However, administrative costs have risen to 11%, one of the highest rates internationally. Meanwhile, public investment stands at just 5.9%—the lowest among comparable nations.
Education receives 9.3% of the budget, almost half the amount allocated by Austria and Switzerland. Despite these variations, Germany’s social security spending as a share of GDP remains at 20%, equal to both the Nordic countries and the EU average.
The study also notes a sharp increase in Germany’s overall government spending ratio since the coronavirus pandemic.
The findings arrive as coalition negotiations on pension reforms approach. With nearly half of social security funds directed towards pensions, the data may influence upcoming policy decisions. Public investment and education budgets, however, remain significantly lower than in neighbouring countries.
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