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Last Updated: Thursday, 30 November 2006, 11:24 GMT
German plan to raise pension age
Angela Merkel
Angela Merkel wants voters to be happy about working longer
Germany's cabinet has approved plans to raise the retirement age from 65 to 67 as Europe's largest economy tries to cut state spending and pension costs.

The move, which needs to win the backing of parliament, is opposed by workers' groups and trade unions.

Like many other nations, Germany is having to change its pension system as its population lives for longer.

The government also approved a plan to try to keep people in jobs for longer and lure some pensioners back to work.

According to Labour Minister Franz Muentefering, only 45% of Germans over the age of 55 are currently employed.

The plan to get people to return from retirement, known as Initiative 50, offers sweeteners including wage subsidies and perks to employers.


Chancellor Angela Merkel's cabinet agreed late on Wednesday to raise the retirement age by two years.

If it gets parliamentary approval, the change will be gradually phased in between 2012 and 2029.

The Federal Statistical Office estimates that people aged 65 in 2050 will live for 4.5 years longer than those at the same age today.

At the same time, the average age will rise from 42 to 50, while the number of people aged over 80 will rise from four million to 10 million, it said.

Coupled with a shrinking birthrate, this means that the total number of people in the workforce will drop by 22% to 39 million from 50 million.

The age change is likely to meet with opposition from workers' rights groups and trades unions, analysts say.

Some observers are concerned that workers' rights have already been eroded, after a number of large corporations pushed through difficult job cuts and wage caps in order to protect their long-term profitability.

Gunnar Winkler, president of social welfare group People's Solidarity, said the current pension and work plans were asking too much.

"This is above all a pension cutback and extends for many people the period of insecurity until retirement," he said.

However, some other workers' representatives welcomed the plans and asked for greater support.

Annelie Buntenbach said her DGB trade union federation "urges the coalition to significantly extend the planned Initiative 50".

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