Demographic time bomb

Employees currently entering the labor market for the first time might be 69 by the time they retire, if the German government follows the advice of its team of five economic sages known as "the wise men."

In addition, the economy will need more women to work, as well as qualified workers from abroad to counter the effects of an aging population and dwindling workforce.

The German Council of Economic Experts on Wednesday presented Chancellor Angela Merkel with a special report into how the effects of social changes in Germany might be kept manageable in the future.

Twice a year, the group - also known as "The Five Wise Men of the Economy" - submit their own independent assessment of the economic situation in Germany. In addition, they are commissioned to compile special reports for the government, with the latest offering entitled "challenges of demographic change."

Step by step changes

The panel said it was necessary to implement existing plans for the pension age to rise from 65 to 67 by 2029. By 2060, they said, that age should have risen still further - to 69.

These higher qualification ages should also apply to civil servants, the panel was careful to stipulate.

If retirement ages were not raised, the experts said, there was a strong risk that national debt would rise dramatically.

German pensioners currently draw an average of 18.2 years while 50 years ago it was barely 10 years.

It was clear, the panel's report added, that German economic growth was likely to slow down due to a drop in population numbers.

To maintain prosperity within society, it said, the social security system would have to be improved.

More healthcare competion

Along with pension schemes, the cost of statutory healthcare was also too expensive, the report found. For this reason, it was deemed necessary to introduce more competition to the healthcare market.

In addition, Germany was thought to need an influx of workers from abroad. To keep the population level constant over the next five decades, it was projected that 350,000 people would have to settle in the country each year.

In the report, the council also recommended that more should be done to make work and family life compatible - so that more women are able to enter the job market.

The experts warned that there was no time to waste with the reforms, claiming it was the only way to cope with rising life expectancy and falling population.

A problem, an opportunity

Chancellor Angela Merkel described the wise men's work as "a great help." Her government will in the autumn present some of its findings on the challenges posed by demographic change. "We hope that this can be looked upon as an opportunity," said Merkel.

A rethink now seems likely on both pension ages and immigration.

Germany's newly-appointed Economics Minister Philipp Rösler also appears to agree. He has stressed that attracting skilled workers from abroad is particularly important as just one of the ways the German labor market and social welfare system can adapt to the future.

Author: Gönna Ketels (AFP,dpa, Reuters) / rc
Editor: Nicole Goebel