Sustainability of Public Finances in Germany: Simulations for the Medium and Long Run

This report was prepared by Martin Werding, Ruhr-Universität Bochum, in cooperation with the Ifo Institute and on behalf of the Federal Ministry of Finance. It provides updated results regarding long-term trends in public expenditure to show the potential dimension of future budgetary risks. The simulations relate to public expenditure in those areas which must be expected to be particularly responsive to population ageing. The legal framework is that effective on January 1, 2013. According to the S2 indicator, the sustainability gap amounts to about 0.6 percent of GDP in the optimistic scenario and to about 3.1 percent of GDP in the pessimistic scenario. Many other indicators and results for alternative scenarios are computed.