Germany is spending record sums on social security – what happens now?

Germany is spending record sums on social security – what happens now?

The latest analyzes by the German Economic Institute (IW) make it clear: Germany occupies a leading position in Europe when it comes to social spending. With an impressive 41 percent of its total expenditure, these funds flow into social security systems. This means that the country ensures greater investment in social issues than any other European country the German Crafts Newspaper reported.

But where does this money go? Almost half of social spending goes to old-age security, while around 16 percent goes to health care. Germany is at the forefront here, together with the Benelux and Nordic countries. So not only are investments high, but they also appear to be targeted to meet the needs of an aging society.

A look at the neighbors

Could Germany perhaps still benefit from looking across the border? Nordic countries, Austria and Switzerland each spend around 40 percent of their government spending on social security, while the Benelux countries have 38 percent. Given an EU average of 39 percent, it becomes clear that Germany can be viewed in a broader context. In addition, spending in the education sector, at only 9.3 percent of total spending, is the lowest compared to other countries, especially Austria and Switzerland, which have almost 50 percent higher spending.

Another point that the IW addresses is the rapidly increasing expenditure on public administration. These increased from 7.2 to 11 percent between 2001 and 2023. A good knack for optimization may be necessary here in order to increase efficiency and offer citizens maximum well-being.

Geopolitical developments in focus

One wonders: what about defense spending? On the one hand, the focus on social issues gives hope for improvements in the quality of life, but the study also shows that defense spending in Germany is continuously maintained at around 2.3 percent of total spending. This number is rather low in international comparison. The EU average fell from 3.0 to 2.8 percent, and in the Nordic countries spending rose to around 3.4 percent due to geopolitical developments.

The IW warns that spending will generally increase in Europe and calls on federal politicians to counteract a future increase in social spending - including in the health care system. The challenge for those responsible will therefore be to find a balance between social investments and securing projects in other areas such as education and defense.

Germany's role as a pioneer in social spending calls for a sharp focus on the right priorities. It will be exciting to see how the federal government will respond to these challenges.