Germany's leader pledges to reform a creaking pension system and says
'failure is not an option'
[June 23, 2026] By
GEIR MOULSON
BERLIN (AP) — German Chancellor Friedrich Merz pledged Tuesday to push
through a proposed reform of the country's creaking pension system that
would include raising the retirement age gradually in line with life
expectancy, declaring that “failure is not an option.”
Merz's coalition of center-right and center-left parties took office
just over a year ago with pledges to reform and turn around Germany's
sluggish economy, Europe's biggest. It has since become deeply
unpopular, in part because of perceptions that it has squabbled but so
far achieved little.
Germany's economy returned to modest growth last year after shrinking
for two years in a row. The government expects underwhelming growth of
0.5% this year, a figure that has been pushed down by the fallout from
the war in Iran.
The country of 83.5 million people already faced increasing competition
from Chinese companies, higher energy costs following Russia’s
full-scale invasion of Ukraine and issues including U.S. President
Donald Trump 's tariffs and trade threats. On top of that, it has deeper
problems such as high production costs, lagging private investment and
increasingly costly health and pension systems, caused by an aging
population.
On Tuesday, a government-mandated panel of experts and politicians
delivered 33 recommendations to stabilize the pension system. The aim is
to prevent the level of pensions from falling and ward off the need for
a big long-term increase of the levy employees pay into the pension
system. They currently contribute 18.6% of gross wages.
Germany has long faced the problem that “fewer and fewer contributors
have to finance pensions for more and more retirees,” Merz said. “Doing
nothing is not an option.”
The panel's central proposals include introducing market investments as
an element of individuals' pension insurance to relieve financial
pressure on the system, based on a model used in Sweden.
Germany moved two decades ago to raise the regular retirement age from
65 to 67, implementing the change gradually. The commission proposed
going beyond that to raise it in line with life expectancy starting in
2031. The life expectancy in Germany is 78.5 years for men and 83.2
years for women, according to the national statistics office.
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Germany's Chancellor Friedrich Merz arrives for the EU summit in
Brussels, Thursday, June 18, 2026. (AP Photo/Marius Burgelman)
 The commission's co-chairperson,
Constanze Janda, said the change would affect the retirement age
“moderately,” and that it would increase by about six months over 10
years if life expectancy continues to rise as it is now.
In the mid-2010s, Germany started allowing people who have paid
pension contributions for 45 years to retire at 63 without a
financial hit. The panel proposed scrapping that financial provision
and raising the minimum retirement age to 64.
It also said that the age at which people can start reducing their
working hours ahead of retirement should be raised from 55 to 58.
The conservative Merz said his coalition intends to “implement in
full,” and quickly, the proposals put forth by the commission. That
intention was echoed by Labor Minister Bärbel Bas, the co-leader of
the center-left Social Democrats.
They will likely face plenty of work to get the package through
parliament, where the governing coalition has a relatively thin
minority. The proposals already have drawn criticism from labor
unions.
“Failure is not an option,” Merz said.
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