On the convergence of pension systems in eastern and western Germany

Chancellor Merkel has proposed a convergence of the pension systems in eastern and western Germany; particularly politicians in eastern Germany are currently discussing this proposal in the context of the debate over poverty among the elderly. The key idea is that old-age poverty is particularly an eastern German problem which could be countered by raising pensions to the level in western Germany. They also argue that 20 years after unification a separate pension pay scale in eastern and western Germany is no longer justifiable. For the convergence of eastern pensions, two different variants are being discussed by policy-makers. In addition to these proposals, the Council of German Economic Advisors in its recent expertise has made a recommendation for a uniform pension calculation for all of Germany. In this article the two variants of a pension increase in the east are presented along with the recommendation of the Council. The author argues that the Council's proposal of a reform based on vested pension rights is the better alternative.