Potential growth slows to 0.4 percent, Nagel urges pension reform
Deutsche Bundesbank President Joachim Nagel called for structural reforms to address German potential growth of 0.4 percent. Speaking in Rostock, Nagel advocated linking the retirement age to life expectancy and highlighted the planned digital euro rollout from 2029.
Demographic drag on trend growth
German real economic growth is expected to reach around 1 percent in 2026, aided by foreign demand and federal fiscal spending on infrastructure, climate protection, and defence.
However, Bundesbank estimates place medium-term potential growth at just 0.4 percent, down from three to four times higher a decade ago.
Nagel pointed to demographic headwinds, with 1.2 million workers reaching retirement age annually compared to 800,000 labor market entrants.
To restore momentum, he advocated for increasing female full-time employment, facilitating skilled immigration, and eliminating incentives for early retirement, alongside reducing administrative burdens to spur corporate investment.
Pensions, payments and sovereignty
Nagel backed Pension Commission proposals to link standard retirement ages to life expectancy and establish a mandatory Swedish-style funded capital component.
He urged ending reduction-free retirement after 45 contribution years, noting beneficiaries are often high earners in good health.
Turning to European autonomy, Nagel framed the digital euro—planned for 2029—as critical infrastructure to curb dependence on US payment providers while safeguarding user privacy.
Economic logic meets political inertia
Nagel offers a necessary reality check on Germany's weak supply side, though his policy prescriptions rely heavily on politically toxic reforms.
While dismantling early retirement subsidies is economically sound, legislative appetite remains fragile.
Central bankers cannot substitute for political courage in executing structural overhauls.
Source: More momentum for the economy
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