Politician Announces Upcoming Proposal for Social Security Benefits Revision (by Chancellor)
The German government is gearing up for a significant reform of unemployment benefits, as the coalition of the Union and SPD aims to agree on the key points for this reform this year. The proposed changes are seen as crucial to reducing gaps in future federal budgets for the years 2027 and beyond.
Chancellor Friedrich Merz has been urging swift action in reforming unemployment benefits, with Chancellor's Office Minister Thorsten Frei considering the targeted savings of five billion euros to be very realistic. However, Professor Enzo Weber of the Institute for Employment Research has expressed doubts about the feasibility of significant savings on unemployment benefits without more economic growth and fewer unemployment benefit recipients.
The planned expenses for the current year are around 502.5 billion euros, 460 million euros less than initially planned. Despite the savings, no changes have been made to the new borrowing in the core budget, with almost 82 billion euros planned. The total debts at the end of the year are expected to be more than 140 billion euros.
The reform aims to replace unemployment benefits with a basic security, and the Federal Minister of Labor, Barbara Bas, is expected to present a proposal for the reform in the coming days. The expected savings effect of the reform on future federal budget gaps is estimated to cover only about 8 to 10 percent of the projected budget shortfall in 2027, with potential savings around 3 billion euros. However, these savings alone are insufficient to close the budget gaps long-term.
The black-red government has been struggling to decide where spending needs to be cut, and funding claims and benefits may need to be reduced. Debates about possible tax increases and social reforms have arisen during the summer holidays.
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As the government moves forward with the unemployment benefits reform, it remains to be seen how the savings will be achieved and whether the reform will be able to address the long-term budget gaps. The proposal from the Federal Minister of Labor is eagerly awaited, and the discussions are expected to continue in the coming weeks and months.
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