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Wednesday, Apr 02, 2025

Economist Calls for Pensioners to Contribute to Increased Defense Spending

With growing demands for higher military budgets, economist Moritz Schularick suggests pension reforms as a potential solution.
In light of escalating international demands for increased defense budgets, Moritz Schularick, President of the Kiel Institute for the World Economy (IfW), has introduced a controversial proposal—pensioners should bear part of the financial burden for heightened defense expenditures.

His comments come amid calls from the United States and prominent German politicians for substantial increases in defense allocations.

Schularick's remarks were made during an interview with German magazine 'Der Spiegel', where he articulated the necessity of fiscal reallocations and potential cuts across various sectors, including the pension system, to accommodate the swelling demands for military funding.

His suggestion coincides with proposals, such as those from Green party candidate Robert Habeck, to nearly double Germany's defense spending to 3.5% of its GDP—posing significant challenges to the country's federal budget.

The backdrop of Schularick's proposal is a global context where NATO members, encouraged by former U.S. President Donald Trump, face pressure to contribute up to 5% of their GDP for defense.

For Germany, this could translate into an additional three-digit billion-euro requirement annually.

Schularick raises concerns about generational equity, pointing to the older generation's consumption of the 'peace dividend' without adequately investing in national security or securing the pension system for future needs.

Among his suggestions is prolonging the retirement age and freezing pension increases at current levels, arguing that a projected 3.5% rise in pensions this year is unjustifiable amidst a stagnant economy.

He emphasizes, 'The tab should not only be picked up by the young, but also the elderly.'

Schularick's critical comments extend to the current German government, specifically reacting to Chancellor Olaf Scholz's skepticism over defense spending increases amid questions on funding sources.

According to Schularick, avoiding such expenditure may ultimately prove costlier, and security remains a fundamental governmental responsibility.

Furthermore, Schularick contends that Robert Habeck's call for a 3.5% defense expenditure aligns with appropriate security measures, particularly as Europe must fortify its defense capabilities independently.

Until European defense structures are robust enough to counter potential threats, he argues, nations remain vulnerable to geopolitical pressures, underscoring the emphasis on developing a domestic European defense industry.

The discourse on who should shoulder the financial burden for national security continues to stir debate across Germany, implicating broader discussions on fiscal policy, demographic responsibility, and strategic military independence.
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