REVEALED: German chancellor warns of unsustainable 'welfare state'
German Chancellor Friedrich Merz has warned the country’s social security system, including pensions, healthcare, and unemployment benefits, is no longer financially sustainable, citing economic stagnation and an aging population.
Speaking at a CDU event in Osnabrück on August 23, Merz said, “The welfare state that we have today can no longer be financed with what we produce in the economy.”
His remarks underscore mounting pressures on Germany’s pay-as-you-go model, which relies on worker contributions to fund benefits. Merz highlighted a shrinking labor force, with projections showing a 9% decline by 2035, and rising pension costs.
In recent years, Germany's migrant influx has surged dramatically, with approximately 1.1 million arrivals from Ukraine in 2022 alone amid Russia's invasion, contributing to total immigrants reaching 1.93 million in 2023 and elevating the first-generation immigrant population to 17.4 million (20.9% of the total) by 2024.
This sustained high migration, including over 450,000 international students in 2025 and ongoing asylum applications totalling around 212,000 pending by late 2024, has prompted policy shifts under the 2025 coalition government toward stricter border controls, faster deportations, and a focus on skilled labor integration while acknowledging the nation's status as a de facto immigration hub.
In a September 5 ARD-Deutschlandtrend interview, Merz called for cuts to social spending, warning that costs “threaten to spiral out of control.”
Proposed reforms include mandatory contributions from self-employed workers, tax incentives for working past age 67, and childcare expansions to boost female workforce participation.
The comments sparked coalition tensions with the SPD, who oppose deep cuts, and public protests over fears of reduced benefits. A September 2024 cabinet plan introduced a €200 billion equity fund to stabilize pensions, alongside bonuses for delayed retirements, but critics, including the Bundesbank, argue these measures fall short without addressing early retirements.
Merz’s push for deregulation and private savings has drawn criticism for prioritizing austerity over addressing inequality, with public approval of his government at 22%.
