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The vultures gather over Europe – The truth about the national debt

Although the Alliance for Democracy was only founded in 2011, there have already been many publications in previous years by its current members, such as this text from the year 2006, which shows in what a calamitous direction all our governments have been steering, but in particular the Merkel government. This article is an historic document, and also the basis of our activities today, since politics remains ineffectual.

The vultures gather over Europe – The truth about the national debt

The personal share of every single citizen in the accumulated total national debt in Germany alone is over € 100,000.- from the moment of birth, and not just € 18,000 to € 20,000, as is often published!

When one speaks of national debt, this usually refers only to the national debt accumulated through annual new borrowing, and which is subject to interest. For the FRG alone, this amounts to around € 1.5 trillion, for which we currently have to pay annual interest of € 67 billion – a quarter of the national budget for a whole year.

What is never mentioned, but what every interested citizen should know, is that there are also debts and commitments inherent in the social security systems. Although these are not subject to interest, these implicit debts amount to several times the direct, explicit national debt.

For better understanding of my statements below, there follow some extracts from the Maastricht Treaty on the European Union.

The Treaty on the European Union signed on 7th February 1992 in Maastricht came into force on 1st November 1993. The Treaty is supposedly the result of external and internal influences. In terms of foreign policy, the collapse of Communism and the imminent reunification of Germany contributed to the decision to strengthen the international position of the community. The progress already achieved was to be secured, and serve as the basis for further progress.

Stability criteria
The Maastricht Treaty pursued five main objectives. In Article 104c of this Treaty, it stipulates that the member states would avoid excessive public deficits.
The Commission monitors the development of the budget situation and the level of public debt in the member states, in order to avoid serious errors.
In particular, it monitors the observation of budget discipline by means of two criteria:
a) Whether the ratio of the planned or actual public debt to the gross national product exceeds a specific reference value, unless
– either the ratio has declined substantially and continually, and has reached a level close to the reference value
– or the reference value is only exceeded temporarily and as an exception, and the ratio remains close to the reference value.

b) Whether the ratio of the public debt to the gross national product exceeds a specific reference value, unless the ratio is declining sufficiently and approaching the reference value quickly enough.

The reference values are specified in a protocol appended to the Treaty, which defines in detail the procedure in the event of an excessive deficit.
If a member state meets neither or only one of these criteria, the Commission produces a report. This report determines whether the public deficit exceeds public expenditure for investments; it also considers all other relevant factors, including the medium-term economic and budget situation of the member state. What constitutes investments is defined in the protocol notes of § 104c as "gross capital investment in the sense of the European system of integrated economic accounts".

The Commission can also produce a report if it is of the opinion, irrespective of the fulfilment of the above criteria, that a member state is in danger of incurring an excessive deficit.
– The committee formed in accordance with Article 109c gives a statement of opinion on the report of the Commission.

– The Council decides by a qualified majority on the recommendation of the Commission, and taking into account any response which the relevant member state may wish to make, after reviewing the overall situation, as to whether an excessive deficit exists.

– If an excessive deficit is established, the Council makes recommendations to the relevant member state, with the objective of correcting this situation within a defined period. These recommendations are not published unless the Council determines that its recommendations have not succeeded in initiating any effective measures within the defined period.

– If a member state continues to ignore the recommendations of the Council, the Council can decide to give notice to the member state to take measures, within a certain period, which are considered necessary in the opinion of the Council in order to reduce the deficit.
In this case, the Council can request the member state concerned to submit reports in accordance with a set schedule, in order to be able to check the remedial actions of the member state.

– The right to bring an action under Articles 169 and 170 cannot be exercised according to paragraphs 1
– 9 of this article.

As long as a member state fails to comply with a decision in accordance with Paragraph 9, the Council may decide to apply one or more of the following measures, and impose stricter sanctions if necessary, such as imposing fines of an appropriate amount, and also request the European Investment Bank to review its lending policy with regard to the member state in question. The President of the Council notifies the European Parliament of the decisions.

Protocol on the procedure in the event of an excessive deficit
The High Contracting Parties are desirous to determine the details of the excessive deficit procedure referred to in article 104 c of the Treaty establishing the European Community, and have agreed upon the following provisions, which are annexed to the Treaty establishing the European Community.

Article 1
The reference values referred to in article 104 c, Para. 2 of this Treaty are:
• 3% for the ratio between the planned or actual public deficit and gross domestic product at market prices.
• 60% for the ratio between the public debt and gross domestic product at market prices.
Article 2
In Article 104c of this Treaty and in this protocol, the following meanings apply:
"Public" with regard to the state: This means to the central state (central government), to regional or local authorities or social security institutions, with the exception of commercial transactions within the meaning of the European system of integrated economic accounts;
• "Deficit": The deficit within the European system of integrated economic accounts;
• "Investments": The gross capital investment within the meaning of the European system of integrated economic accounts.
• "Debt level": The gross total debt at nominal value at the end of the year after consolidation within and between each of the areas of the State sector within the meaning of the first point.
Article 3
To ensure the effectiveness of the Treaty in case of an excessive deficit, the governments of the member states in the framework of this procedure are responsible for the deficits of the state sector within the meaning of article 2, first point. Member states shall ensure that the internal procedures in the budget area enable them to fulfil their obligations under this Treaty in this area. Member states must inform the Commission regularly and without delay of their planned and actual deficits and the level of their debt.
Article 4
The statistical information necessary for the application of this protocol are provided by the Commission.

Purpose of observation of the stability criteria
The 3% and 60% referred to in Article 1 are agreed limit values on the commitments of the stability pact. Such a stability pact has been concluded in particular to ensure stability within the European Union, i.e. in the member states of the EU, and in particular also to assist in avoiding excessive inflation. This requires on the one hand the compliance with these deficit quotas by the individual governments of the member states, while on the other hand, the European Central Bank (ECB) should ensure that monetary stability is ensured by appropriate measures according to the economic situation in the EU.

Where there is less domestic demand, growth collapses. Where growth collapses, there are fewer jobs. Both Germany and other EU member states are here in a vicious circle. On the one hand they have to cope with escalating social benefits that necessarily require reforms to reduce these costs, on the other hand there are vested interests, particularly in the social field, and the principle of legitimate expectations and the ownership guarantee to be taken into account. Such reforms can therefore produce an effect only very slowly – if at all.

Potential savings therefore exist only with regard to the subsidies and "social" transfer costs. As long as electioneering behaviour goes hand-in-hand with political considerations, it will hardly be possible to get to grips with these major items of subsidies and transfer costs. This area will remain unchanged until fundamental reforms are made, and instead of these subsidies and transfers, money is invested in education and research, and the funds released in this way then used to co-finance a part of social benefits.

Tax cuts - a viable option
The economies of the individual member states need tax reductions instead of tax increases in direct and indirect taxes, and if at all possible the reduction of incidental wage costs! Only if both are gradually implemented will there be any prospect of growing domestic demand.
In Germany in particular, which earns 25% of its national revenue from exports, domestic demand is crippled so severely that it is imperative to move away from the concept of a welfare state by means of additional tax financing. Courageous governments know that the option of tax cuts can be taken without fear, because experience shows that the total tax revenue after such reforms will not be lower, as expected by politicians, but instead significantly higher. Increasing taxes such as VAT and also increasing further taxes still under discussion, endanger the overall prosperity of the country, which is dependent to the level of 75% on domestic demand (even if temporary budget consolidation is being achieved at the moment).
The deficit quotas of the member states are based only on the direct debts. These amount to around € 1.5 trillion in Germany, for which about € 67 billion has to be paid in annual interest. This is well over 25% of the total national budget.

Implicit debts
Article 1 of the quoted protocol notes on the procedure in event of excessive debt refers expressly to 3% for the ratio between the planned or actual public deficit on the one hand and 60% for the ratio of the public debt to gross domestic product, both at market prices. It therefore refers to the actual public deficit and the actual public debt – defined as gross total debt at the nominal value! From where do member states - in our case the Federal Republic of Germany – derive the right, in the light of these public deficits and public debt levels, to use only the new borrowing or the entire residual debt resulting from the new borrowing and interest, and not to take into account implicit debts?

According to calculations by the International Monetary Fund (IMF), Germany for example has already accumulated implicit debts of € 8 trillion. This mountain of debt exceeds the gross domestic product by a factor of over 4. The entire debt of the Federal Republic of Germany is therefore around EUR 8 trillion according to the IMF. This is the 5.3x the officially quoted debt of € 1.5 trillion for central government, states and municipalities. The 3% which may represent the ratio between the planned and actual public deficit and gross domestic product at market prices also contains only the actual new borrowing in the case of the Federal Republic of Germany, namely the amount which is required for borrowing to keep expenditure and revenue of the national budget in balance.

In fact however, the ratios are changing above this level to much higher rates than 3% and 60% in relation to the gross domestic product at market prices. Even if we put the € 8 trillion implicit debt in relation to € 1.5 trillion actual accumulated debt from new borrowing, the resulting factor of 5.333 shows that the ratio of public debt to gross domestic product at market prices is 533% instead of the allowed rate of only 60%. The 3% for the ratio between the planned and actual public deficit and gross domestic product at market prices is also changing significantly, when one uses actual ratios taking into account implicit (!) debts. Even a roughly estimated percentage will not be less than 20%. We therefore have a rate of over 20% instead of 3% on the one hand, and on the other, instead of 60%, a rate of over 500%.

It is completely incomprehensible that implicit debts should be ignored. The entire debt of the member states of the European Union is disturbingly high, because countries such as Italy, France, etc. are proportionately in the same debt situation as Germany. It is absolutely incomprehensible why, given this high implicit debt, in many European member states the stability pact with its protocol note to article 104 c of the Maastricht Treaty should refer only to direct debt accumulated by new borrowing.
Such mountains of debt from implicit liabilities, which exceed the gross domestic product many times over, can no longer be reduced by tax increases – not even over extended periods. They are simply too immense! Within the framework of proportionality, there is no possibility any more of reducing these implicit mountains of debt, even partially. As long as new debts continue to be incurred and even unconstitutional national budgets are accepted, there is not the slightest possibility of even a small repayment of direct debt. The direct debt of € 1.5 trillion will therefore only increase, instead of being reduced. The remaining implicit debts of nearly € 6.5 trillion (according to the IMF) will remain as millstones around our necks.

Social reforms
Quite drastic social reforms would be the only way of debt reduction. These would however have to be so severe that even current pension recipients would have to suffer drastic reductions in their monthly pensions. The situation in Germany can therefore be summarised as follows: If no direct federal grant is made to German statutory pension insurance and also no eco-tax contribution is available for German pension insurance, the pensions of all male and female pension recipients would have to be reduced in the ratio of 78 to 198 – or in other words by almost 40%.

The annual total pension payment to all pension recipients of German pension insurance amounts to € 198.9 billion. The federal grant including the eco-tax share amounts to € 78 billion. As a result of the demographic factor, even greater reductions would result for the still active social insurance generation from their retirement age. Although one might think that payments for future pensioners had already been reduced by the sustainability factor and increasing the retirement age. There are even members of the Council of Experts who already count this as a major reform. In terms of the implicit debt, a hardly noticeable relief occurs, because it manifests itself in terms of entitlement and not in terms of already ongoing pensions, for which pension payments must be made now. As long as the reduction of remuneration of the current pension recipients, which would be essential for debt reduction, cannot on the one hand be applied to pensioners for subsistence reasons and on the other hand by politicians for electoral reasons, hardly anything will change with regard to the level of implicit debt.

What do implicit debts include?
Implicit debts are all the items that actually should have been accounted for in the company balance sheet of "Germany Ltd.", but were not and have never been.
A balance sheet drawn up by a conscientious, professional businessman would have shown a reserve item in the amount of accruals to these reserves under expenditure. The expenditure would also have shown the new debt as additional borrowing. And such balance sheet items would also have to have been entered for all risks, either for provisions under the civil service pension laws, SGB VI in terms of benefits to insured persons of the German statutory pension insurance and secondly for the entitlements to civil service pensions and payments from statutory pension insurance. This applies to all already ongoing pension payments as well as provision and insurance entitlements on the national, state and municipal level. This should have been done in the form of cash value reserves for pension recipients and entitlement values or partial value reserves for all those still in employment, either on the basis of civil service pensions or of the entitlements to social security pensions under SGB VI. Ageing provisions are also lacking in statutory health insurance. Proper accounting would have produced approximately the following figures:

Recipients    € trillion
Retired civil servants 0.8
Active civil servants   0.5
Recipients of statutory pension insurance 2
Active statutory pension insurance 1
Ageing provisions in statutory health insurance 1
Care insurance 0.7
Direct national debt 1.5
Other payments 1.0
Total € 8.5 trillion  
(Qualified estimates on the basis of statistical tables of the Federal Statistical Office, as well as numbers in the federal budget in accordance with a flatrate actuarial approach using average values.)

This does not take into account that in addition to the implicit debt, the cash value (at 0% interest) of the interest on the explicit national debt of central government, the states and municipalities of € 1.5 trillion, currently incurring approx. € 67 billion in interest should, strictly speaking, also be taken into account – an amount which was conveniently set at an additional € 1.5 trillion; the explicit national debt is not balanced by any assets which might be able to produce any returns in the order of size of the interest, currently running at approx. € 67 billion annually. The interest burden of the country is financed largely from annual new borrowing, and not from assets providing any return which might balance the debts.

Similar amounts should have been applied for Harz IV recipients at the usual rates of former social assistance as well as for other social services such as support services in case of illness in the public sector, federal child benefits and parental benefits – and at average annuity values or cash values for limited annuities, taking into account a qualified estimate or resources. The subsidisation of coal mining and other subsidies and transfers should also have been balanced in a similar way. And in particular, lacking reserves for the pensions provided only under the transfer procedure (pension not covered by capital) of the VBL and the ZVS should have been considered at the cash value.

With my above, flat-rate calculations I easily come to the total amount for the implicit debts of Germany quantified by the International Monetary Fund (IMF) at € 8 trillion. These € 8 trillion should certainly be a good guide as an order of magnitude, but in my opinion are still not sufficient to reflect the total implicit debt.

Interest
The question of the interest rate in the calculation of the above costs, which have never found their way into national budgets, is very important for the accumulation of the required provision reserves. The above flat-rate estimates made by me are based on an interest rate of 4%. The direct national debt is subject to interest at approximately 4.5% as compound interest (interest : debt; €67 billion : € 1,500 billion). Other than the fixed interest on the national debt (central government, states and municipalities) an interest for all missing provision reserves of 0% must be assumed in principle, because there can be no interest for missing active items. This approach increases the figure to nearly € 12 trillion! This does not take into account however the above cash values such as part of the Hartz IV recipients (former social assistance recipients), aid in the public sector, federal child benefits and parental benefits, etc. as well parts of the subsidies.

The calculations of the International Monetary Fund can be requested and, where appropriate, supplemented. The estimated calculations made here can also be calculated more exactly. This is not necessary, because it is here only a matter of documentation of orders of magnitude. In the light of the outrages committed under this give-away policy to the detriment of all citizens – in particular young adults and children – one billion more or less makes little difference!

The "pensions lie"
According to the 2004-2008 National Finance Plan drawn up by the BMF "Special Budget Committee", the official position on provision commitments is stated under 6.3. "Provision payments" as follows:

"The future legal civil service retirement benefits constitute uncertain liabilities, the level of which is subject to legislative regulation within certain limits (!). They will therefore not be itemised as part of the national debt."

For the Federal Government alone this amounts to an average total pension cash value (at average retirement age) of about € 215 billion for Section 33 in the amount of € 8.8 billion for former government and railway officials in the amount of € 5.3 billion and for former postal officials amounting to € 5.5 billion in annual pensions. Together this makes € 19.6 billion in annual pensions for central government alone, excluding states and municipalities. Rounded up, this gives for central government, states and municipalities – central government provides an 11% share for all employees and pensioners in public service – a cash pension value of around € 0.8 trillion for all retired officials of central government, states and municipalities without including the cash values for average annual benefits = payments in the event of illness and care. For all active officials the amount of qualifying entitlement value for the earned pension interests or the necessary value reserves, which in the past should have been accumulated until today as pension provision, is estimated at around € 0.5 trillion. The government, states and municipalities are therefore short of € 1.3 trillion in provision reserves for active and retired civil servants, which should have been accumulated by today as expenditure in national budgets, and would therefore have lead to much higher new borrowing (deficits) than actually shown in the national accounts. It remains inexplicable with regard to the amount of such funds how one can justify the bold claim that this is a matter of "uncertain" liabilities, the amount of which should lie within "certain limits" subject to legislative control, particularly since civil servants' provision of central government, states and municipalities is agreed as fixed and binding, both with regard to entitlement and amount, in civil service pension regulations (legally specified).

This argument is similar to that of the Senior State Prosecutor in Berlin, according to whose statements the pension is still secure, if it is reduced to € 1/month (with an otherwise average monthly pension of € 980.- for male pensioners and € 630.- for female pensioners and widows). According to the above argumentation of the Federal Ministry of Finance and the Senior State Prosecutor in Berlin, security only exists with regard to confirmation of an entitlement – never according to the actual amount!! Pension payments on the other hand, including for statutory pension insurance, are legally specified in SGB VI.

We must then ask ourselves: Are all other laws of the legislature to be taken as lightly as the provision laws, which the legislature itself does not take seriously? If even the State will not comply with the law, how can the State expect this of the ordinary citizen? It is an act of complete and unacceptable brazenness on the part of the government and the courts to try and deceive the people in this way. These bodies have thrown away the confidence of the people. If the Federal Constitutional Court grants the legislature freedom of action in some respects, it should certainly not be freedoms such as these!

Failed social policy from the very beginning
The implicit debts are mainly due to the fact that Germany has operated a social policy which is misguided from the point of view of a conscientious business. Although the former Economics Minister Erhardt, the father of the German economic miracle and later Chancellor, urgently advised against it, the system of the statutory pension insurance was built up and continued in the years following 1949, and especially in 1956, on the transfer procedure. Rather than providing for the generation that was involved with the reconstruction after the war from tax revenue and hardship benefits from taxes, and immediately including the younger generation in funded pension provisions, governments took the path of transfer-financed statutory pension insurance for all, even for young people. It was the wrong path!

If one lives from hand to mouth, as is the case of the transfer procedure, then the last person in the system no longer receives what all the others before him received, the costs cannot be balanced, and one arrives sooner or later in the situation in which we now find ourselves today. Since 1956, election gifts have been generally distributed by means of the transfer-financed German pension insurers to pensioners and those still in work. This must now be recovered, although nobody knows how. The dilemma is that the number of pensioners is always growing and is becoming increasingly attractive as a voting group, and that more and more young adults will claim in the future, that they are expected to pay for something which they themselves will not receive in future.

This will increasingly lead to the formation of another substantial voting group (which will one day be demonstrating on the streets, as did young people in France as a result of the planned restrictions to dismissal protection). How politics can cope with a such dilemma at all, remains the big question. The government must on the one hand take something away from the people by minor reforms ("small steps"/ "Merkel baby-steps"), or real reforms, which would even have to include direct reductions for current pensioners. Politics in turn takes this as an opportunity to warn against future poverty in old age and to recommend private provision instruments such as the Riester pension, Rürup pension and the like or the conversion of salary into occupational retirement provision.

From poverty in old age to poverty in youth
On the other hand, the criticism is already being made that the population is saving too much. If all citizens had savings, these could simply be redeployed from bank accounts to pension funds. But average wage-earners, who have to feed family with one or two children, find it difficult to put money aside. Nevertheless the state still recommends that they avoid "poverty in old age" by paying into another retirement provision system in addition to the statutory pension insurance contributions. This however contributes to driving young families into "poverty in youth".

And the young adult pays an amount into statutory pension insurance for current pensioners which he himself will not receive in future. The level of statutory pension insurance will fall over the next 20-40 years to a basic pension level. The average young adult will therefore have to pay an unchanged high amount into statutory pension insurance, even though he has hardly any resources for this, and at the same time take out private life insurance, in order to fill in the gap left until he can draw his pension, with the meagre allowances "generously" offered to him by the State. He has then almost certainly no purchasing power left above basic subsistence level. Domestic demand will not be stimulated under any circumstances. There will be no growth, but only more unemployed. And this trend will be reinforced by any further tax increases.

The result of political foolishness since the beginning of the 1950's until today is proof of political irresponsibility!

Calls to the EU Commission or the European Court of Justice
Taking into account the implicit debt to be financed, the country has been so mismanaged by all shades of politics since the 1950's that now only the EU Commission in Brussels and/or the European Court of Justice can call on Germany to adhere to Article 1 of the protocol on the procedure in the event of an excessive deficit, which also includes the implicit debts. Germany has not been in a position to do so so far, nor will it be able to do so in future. The Maastricht Treaty with the corresponding articles of the relevant protocol notes was however agreed by parties to be taken seriously. Should the EU Commission or the European Court of Justice consider that the implicit debt does not have to be included in the public deficit and public debt under Article 1 of the Protocol on the procedure in the event of excessive deficit, the justification for this decision would be most interesting. The same also applies accordingly for Article 104c of the Treaty itself. Because if not all debts of the State have to be included in the debt level, but only that part relating to debts accumulated from new borrowing, then the objective of the economic and monetary policy of the European Union has been confounded from the outset. The European Court of Justice may possibly, by way of declaratory proceedings, require the German government and all other member states of the EU, under § 104c of the Maastricht Treaty of the European Union and the protocol note to § 104c, to confirm the observation of the percentage limits, including all implicit debts. If the EU Commission or the European Court of Justice do not consider themselves in a position to do so, then they must be requested in this case to notify the petitioner what sense or purpose there can be to the stipulations on economic and currency policy in the Maastricht Treaty of the European Union and the corresponding relevant protocol notes. In combination with the declamatory proceedings, the call must also be voiced for the criteria to be redefined, taking into account all implicit debts, in the form of other, new limits, which can then ensure from the point of view of economics and currency politicians that the economy and currency of the EU remain stable.

The question must also be asked of the European Court of Justice as to whether or not the situation described clearly shows that due to a misdirected social policy, with all the resulting immense financing burdens, the market economy of the capitalist society has for decades been in the process of managing itself to death, as did Communism before it. And if the Maastricht Treaty of the European Union has not included all implicit debts in its considerations from the very beginning, it still offers with its deficits regulations a cloak and a disguise for individual member states affected to this extent. If the Treaty and the protocol notes actually refer to the total of all new debt (not the implicit debts) accumulated by the relevant deficits of the individual budgets, then the Federal Government, through years of inaction over long-needed reforms, irrationality, lacking economic responsibility and fear of voters, has for years (2002 -2006) failed to comply with the EU requirements by the use of unconstitutional national budgets. This fear over its own political position hinders the government in helping us out of the worst crash situation of the post-war era. This requires a completely different form of government management with different responsibilities and immediate action. Yes, even different basic laws!

As described above, in the Protocol on the procedure in the event of excessive deficit in the Maastricht Treaty, investments are defined as gross capital investment in the sense of the European system of integrated economic accounts. If a member state meets neither or only one of the criteria, a report is produced. This report takes into account whether the public deficit relates to the public expenditure for investments. The latter applies for the Federal Republic of Germany from 2002 to 2006 (budget acceptance). The German public deficit of the last 4-5 years has always substantially exceeded the gross capital investment. According to the provisions of the German Basic Law as well as according to the provisions of the Maastricht Treaty, this is unconstitutional and not compliant with the Maastricht Treaty.

Not only are the reference values exceeded, but also the deficits (new debt) are only partially accounted for by corresponding gross capital investment.

I believe that the European Commission must present consequences to the Federal Republic of Germany if it does not immediately bring its expenditure into order. Regardless of this, declaratory proceedings before the European Court of Justice also appear advisable in this respect.

Asset situation in Germany
The total monetary assets of all Germans amount to around € 4.9 trillion. Of this amount, € 4.65 trillion is accounted for by approximately 5% of Germans; the remaining 95% of the population accounts for only about € 0.25 trillion in monetary assets.

The implicit debts concern mainly the 95% of the population. The implicit total debt of Germany is therefore about 25x the monetary assets of 95% of the German population for whom this implicit debt has been accumulated. This means that the 95% of Germans would have to have over 25x as much financial wealth as they have actually accumulated. They can therefore cover only 3.8% of the total, accumulated implicit debts which are attributable to them with their financial wealth.

The sell-out of Germany?
The city of Dresden has relieved itself of its relatively much lower debt burden by the sale of a large number of real estate assets, for example to the Americans. Something similar would have to be done on a large scale with the material and property assets of all Germans, and the resulting proceeds would then have to be transferred to the State, in order to reduce implicit debt. This would mean a sell-out of the Federal Republic of Germany, as has already happened proportionally with the sell-out of Dresden.

Such possibilities do not of course exist in reality. Nor could any buyer be found for Germany who would not take the implicit debt into account in the purchase price. In the event of a sale of Germany, for example to America or another state, the situation would be no different to that of one company buying up another. The pension commitments of the latter company and all its debts would naturally have to be taken into account in the purchase price at the cost of the company being sold out – "Germany Ltd.".

The example of Switzerland
The Chairman of the Expert Commission of the Federal Government, Mr. Rürup, has spoken out on the subject of the organisation of the social systems in Germany in comparison to those in Switzerland, and emphasised positively that in Switzerland in particular, the pension insurance system is only financed marginally by the transfer procedure, and is otherwise financed largely by capital backing. In Germany, the situation is the reverse. 85% of all provision commitments are still met through the transfer procedure. They are not financed at all. Only between 10 and 15% of the German pension commitments are financed by capital coverage. Rürup said in a television interview that this was a historic development in Germany. What he failed to say was that he considered this development to be regrettable. But the fact that he made this comparison and somewhat wistfully mentioned that there had been a different historic development in Germany than in Switzerland, just shows that he wants to say to the Germans how desirable it would have been if the financing in Germany had been carried out in the same way as in Switzerland.

As Chairman of the Expert Council of the Federal Government, he has with these statements actually given an indirect oath of disclosure on behalf of the Federal Government. Another member of the Expert Commission, Mrs, Weder di Mauro, a Swiss, emphasised in the past that the problem of the Germans is their high savings quota. On the other hand, the world of politics says that people should make more provision in the form of funded pensions, in order to be able to cover the shortfall in statutory pension insurance. Di Mauro believes that this is not a contradiction, but that both would be appropriate - even if people have only limited financial resources. Both were nevertheless true, if one looks at the periods involved; in the long term, more saving and investment create more growth. In the short term however, higher savings has a dampening effect on the economy. There may therefore be a conflict of objectives at the moment. She considers however that as an economist, she "should be an advocate of the long-term view". However, the IMF figures show that the long-term problem is very serious in Germany.
No short-term demand-induced boom would solve this problem.

The end of the welfare state
This statement by a member of the Expert Council, in addition to the previous statements of the Chairman of the Expert Council, shows clearly the hopeless situation in which one also finds oneself as an expert in Germany. And in this situation, politicians proclaim the welfare state by tax financing. In the past, we have had a welfare state. Since this will no longer be the case, politics proclaimed the welfare state. And because expenditure cannot be brought under control, it calls for higher revenue through higher taxes – whether in direct or indirect form, in order in this way to increase the number of taxpayers while the number of social security contributors is falling.

This will ultimately destroy the economy completely. Revenue problems cannot be solved by mere proclamations!

Historical developments have shown that every country, viewed statistically, goes bankrupt on average about every 60 years. In the case of Germany, 57 years have now passed since the last currency reform in the year 1949. The next swan song seems to be imminent. Short-term manoeuvring over tax revenue and partial reforms in the social systems may delay things for some years, but in view of the immense implicit debt, it is clear at which stage we now find ourselves, not only because we are coming to the end of the above 60-year period.

The blame for the whole mess in the years following the 1949-1957 currency reform must be placed on the shortsightedness of politicians, who against all expert advice have been steering the social systems into the transfer procedure (in particular advice given by the former Federal Economics Minister and later Chancellor, >Dr. Ludwig Erhard).

An irremediable mistake on the part of politics and a lamentable situation for us all!

We should finally make politicians responsible through the Basic Law – including for the wrong EU and foreign policy! People at the top like former Chancellor Kohl should be analysed with great detachment, because he set in motion a defective reunification policy, which has today also resulted in a defective eastward enlargement.

Currency reform for the whole of Europe (EU) could be one vision.

The countries newly admitted to the EU will be given a higher standard of living. We on the other hand will have to satisfy ourselves with a much lower standard of living in future!
On the 2017 Federal Elections
No Restraint
The IMF
Trump’s Election is a Warning for Germany’s Political Parties
Year-End Selection of Texts
CDU Party Congress 2016
IMF Crisis Management a Failure
Deployment of the Bundeswehr in Germany
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On the 2016 German State Elections
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Wasting Time
New Rules, Same Impetus
Call in the Army
Politicians Run from Themselves
Tax Policy Loopholes
Europa without the Euro
Alternative to the Euro
Hellas
Easter 2015
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Tidying Up
Insolvency Statute
Heiner Geißler
Germany Corrupt No More
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Unbridled Power
Heaven on Earth
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Pension Debacle
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Acid Test
Two Very Different Issues
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The Recession Principle
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Kohl and Merkel
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Reforms
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They are also blind on 2.
The Stability Pact
Avoid Obama
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On László Andor’s speech
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OECD report
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65 years of the Basic Law
Hypocrisy
Who will save the life-insured?
Minimum wage
Minimum Wage I
Minimum Wage II
Minimum wage III
Minimum wages IV
The minimum wage V
Arise for revolution
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Switzerland and Europe
Protection of the Constitution and services
The impossible triangle
The standard pension
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The old “Welt”
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Zeroes – commas – nothing!
Book publication
Court Condemns Politicians
The highest German court
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Soon without cash
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Repeated deception of the people
De-dictatorisation
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With full intent
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