Germany expedites cuts to social welfare, pensions, and healthcare to cover military spending, deepening poverty for workers and pensioners while sparing the wealthy. Rising deficits fuel class tensions, prompting calls for socialist reorganization.
Germany is moving towards deep cuts in social welfare, pensions, and healthcare—policy shifts now expedited by Chancellor Friedrich Merz, who indicated in his recent summer press conference that substantial changes are necessary sooner than previously planned. Previously, the governing coalition of the CDU/CSU and SPD had deferred decisions on social cuts to expert commissions, focusing instead on quickly raising military expenditure. The intent was to mitigate public resistance by postponing unpopular social cutbacks, a tactic that is no longer tenable according to Merz.
The urgency stems from mounting deficits in Germany’s social insurance systems. Statutory health insurance providers saw their deficit rise sharply from €1.9 billion in 2023 to €6.2 billion in 2024, and an additional €4.5 billion deficit in the first quarter of 2025, with the 2025 year-end estimate ranging up to €27 billion. This is driven by rising health costs—growing at 6.8%—outpacing revenue, which only increases 3.7% due to stagnant wage growth. To counter these losses, insurers have upped supplementary contributions from an average of 1.7% to 2.5% or higher, diluting workers’ wage gains.
Meanwhile, pension insurance faces its own crisis. After several years of budget surpluses, it is now projected to run a €2 billion deficit in 2024 and a €7 billion deficit this year, with reserves expected to run dry by 2027. The government refuses to increase its already insufficient subsidies for “non-insurance benefits,” and rules out more social spending due to a forecasted jump in state debt from €2.7 trillion to €3.7 trillion, largely tied to military expenditures.
Pensioners are particularly hard-hit. Despite nominal increases, pensions are increasingly taxed, heading toward full taxation by 2040. Further deductions for health and long-term care insurance, which have risen significantly in recent decades, erode real pension income. Over half of pensioners—over 10 million people—now receive less than €1,100 a month, beneath the poverty line; one-fifth of the population over 65 is at risk of poverty.
Social benefits for the broader population are also targeted for reduction. The citizens’ income benefit, a safety net for those with little or no income, is set to be downgraded to a more basic level, with the €40 billion budget for 2024 slashed. Proposed fixes include schemes like a “baby boomer solidarity surcharge,” which would have slightly better-off pensioners subsidize those poorer, but do not address the inequalities caused by the wealthiest Germans—249 billionaires and 1.6 million millionaires holding €5.4 trillion in assets—who pay little toward the insurance funds.
The media and economic analysts see rising social conflict as inevitable, with historic parallels drawn to 19th-century class struggles. There is growing sentiment that current policies benefit the wealthy minority while shifting crises onto the working majority. The piece concludes with a call for workers to organize independently of traditional parties and trade unions, advocating for a socialist transformation of society to prioritize social needs over profit and militarism.
