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Economist Sebastian Dullien: "Retirement at 70 is nothing more than a pension cut"

2022-08-08T11:02:20.279Z


Economist Sebastian Dullien: "Retirement at 70 is nothing more than a pension cut" Created: 08/08/2022, 12:55 p.m By: Fabian Hartmann Container handling at the Port of Hamburg: Where is the German economy headed? © Christian Charisius/dpa Germany is heading for uncertain times economically. In the IPPEN.MEDIA interview, trade union economist Sebastian Dullien promotes a new aid package – he re


Economist Sebastian Dullien: "Retirement at 70 is nothing more than a pension cut"

Created: 08/08/2022, 12:55 p.m

By: Fabian Hartmann

Container handling at the Port of Hamburg: Where is the German economy headed?

© Christian Charisius/dpa

Germany is heading for uncertain times economically.

In the IPPEN.MEDIA interview, trade union economist Sebastian Dullien promotes a new aid package – he rejects longer working hours.

Berlin – It's still summer.

Gas prices are rising, but the heating season is – at least it feels – far away.

The economist Sebastian Dullien from the Institute for Macroeconomics and Business Cycle Research (IMK), which is close to the union, is concerned about autumn and winter.

Inflation is unlikely to have peaked yet.

In the IPPEN.MEDIA interview, Dullien promoted another relief package, a more relaxed approach to the debt brake - and he praised the traffic light coalition's crisis policy.

Dullien rejects a later retirement.

Mr. Dullien, the economic momentum has weakened significantly recently, and some observers are already seeing a looming recession.

How is Germany doing economically in the summer of 2022?

It is true that economic activity has slowed down.

A recession means that there is two consecutive quarters of negative growth.

It can happen.

For 2022 as a whole, however, I still think it is unlikely that gross domestic product will decline.

At the end of last year we had another episode.

So we're back at a relatively high level.

And: In contrast to the Corona crisis, the situation for many companies is even better than expected.

However, there are dangers in winter and into 2023, when gas becomes scarce and energy prices remain high.

War, Corona, disrupted supply chains: The economy is slowed down by external things over which it has no influence.

How can politics help?

The shock in energy prices has an impact on both the supply and the demand side.

The companies have two options: either they stop production or they pass on the higher costs.

That fuels inflation.

Our surveys have shown that people are already starting to limit their consumption, or at least are considering it.

This is also reflected in retail sales, which fell in June.

And the additional burden has not yet fully reached households.

Gas prices are likely to continue to rise.

In wholesale, the gas price has increased tenfold, from just under 20 euros per megawatt hour to just under 200 euros.

This has not even reached the consumer.

So the purchasing power of households is still going to be massively affected.

This is where the state can intervene to help.

However, prices always have a signal and steering effect.

What can the state do without overriding this mechanism?

The state can protect purchasing power and still keep the price signal intact.

An example of this is the energy allowance that is paid out in September.

It supports households - and the price is not distorted.

With my colleague Isabella Weber, I also proposed the model of a gas price cap: the price would be capped for basic consumption.

For everything that goes beyond that, the full price would apply - so the steering effect of the price signal would remain.

There are a number of instruments.

You just have to be willing to use them.

But one thing is clear: there will then be conflicts with the debt brake.

If they are to be adhered to, there is not much leeway to support household purchasing power.

IMK Director Sebastian Dullien.

© Peter Himsel

Economist Sebastian Dullien: The traffic light relief packages were socially balanced

From your point of view, the debt brake cannot be maintained in the coming year?

In this situation, it is certainly not economically sensible to want to comply with the debt brake at all costs.

There is a way out: the debt brake contains an emergency clause that also allows higher levels of debt in a difficult economic environment.

It could easily be argued that the current crises are beyond government control.

So there would be a good reason for extra credits.

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The government has already launched relief packages.

Didn't they help?

Yes, they were, on balance, quite well made and socially balanced.

That surprised me myself.

An example: For a family of four with two earners and a net income of 2,000 to 2,500 euros, the packages already cover 64 percent of the additional costs this year.

But of course there are also gaps: students and pensioners who have received little or no relief.

Families with only one earner are also less relieved.

So there is a need for improvement.

Especially since the peak of inflation is still ahead of us.

What does that mean specifically?

At the end of the summer, the 9-euro ticket and the tank discount will expire.

It is also unclear how long gas will continue to come from Russia.

The new gas surcharge will increase inflation in the fall.

Irrespective of this: Prices are likely to remain at a high level in 2023 as well.

So there are economic reasons for another relief package;

simply in order not to stifle purchasing power.

It would also be necessary from a socio-political point of view, since people with low incomes simply have no reserves to compensate for rising prices for basic food and energy.

For them, the question of further help is particularly urgent.  

What measures should a new relief package contain?

As I said, the flat-rate energy price has a targeted effect.

It would be conceivable to pay out money to all households again at the end of the year in order to offset the additional payments in 2023.

Such a step would also be in line with the debt brake.

A gas price cap for basic consumption would also help 20 million households – that is half of all households in Germany.

At the same time, this would have the advantage that the high inflation rates could also be reduced a bit. 

About IPPEN.MEDIA

The IPPEN.MEDIA network is one of the largest online publishers in Germany.

At the locations in Berlin, Hamburg/Bremen, Munich, Frankfurt, Cologne, Stuttgart and Vienna, journalists from our central editorial office research and publish for more than 50 news offers.

These include brands such as Merkur.de, FR.de and BuzzFeed Germany.

Our news, interviews, analyzes and comments reach more than 5 million people in Germany every day.

IMK Director Sebastian Dullien: "I see no danger of a wage-price spiral"

Isn't it also part of the truth: even if the inflation rate falls again, will prices remain high?

As soon as the shortage of energy, i.e. oil and gas, is resolved, prices are likely to fall again.

But prices are also rising elsewhere: in restaurants, in cafés and pubs, for basic foods.

For many things in everyday life.

It is quite possible that these price jumps will last.

That would be another argument for a relief package.

The unions want higher wages.

IG Metall is demanding eight percent more money.

Is that justified - especially in view of the danger of an impending wage-price spiral?

What initially sounds like a lot is put into perspective by the longer duration of the collective agreements.

Calculated on an annual basis, the increase in fees is lower.

In addition, it is not relevant what demands the trade unions enter into the negotiations with the employers - but what comes out of it at the end.

I currently see no danger of a wage-price spiral.

There are not only losers in the crisis.

Some companies are reporting record profits.

The SPD and the Greens are flirting with an excess profit tax.

An economically sensible proposal?

Such a tax would make sense if certain industries are making unachieved profits in the market.

You just have to be careful who you want to meet.

It's about those who take advantage of scarcity to increase their own margins.

And not just those companies that are expanding production due to higher demand.

The target of an excess profit tax is clearly not the vaccine manufacturer who brings a new product onto the market and scales it up.

But when oil companies report record profits, the question arises as to whether an emergency is not being exploited.

Ultimately, the debate about the excess profit tax is also about the acceptance of the market economy system. 

Federal Finance Minister Christian Lindner (FDP) says that the German tax system knows no excess profits.

So: The assessment basis for corporate income tax is not set in stone.

Lawyers in the ministries can certainly be creative.

It's worth looking at France.

There, the discussion about a possible extra tax alone has already led to the energy company Total announcing that it will lower petrol prices.

So it should definitely be talked about.

Economist Sebastian Dullien: Debate about retirement at 70 not productive

Other proposals for crisis management can be heard from the employers' camp.

One of them is: working until 70. Does that solve the problems?

In essence, it is about: Those who do not work until 70 will receive a lower pension.

So it's a pension cut.

As a journalist or scientist, it may be possible to work that long.

In many professions, however, people are physically broken beforehand.

I don't think it's a good idea to have a debate like this now.

Especially since there are other levers to make the pension system sustainable.

There is room for improvement when it comes to the employment rate.

We should ask ourselves the question: How can we better integrate women or refugees into the labor market.

That's what we should be aiming for, not working life.

Source: merkur

All news articles on 2022-08-08

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