EU CRISIS SCANDAL: PENSION LIABILITIES OF FRANCE & GERMANY ARE HALF OF EU TOTAL

 EU State pension liabilities at three times gdp. UK’s are only 94% of gdp.

Franco-German hyposcrisy revealed by Freiburg Study

Very few people stop to think in life about why they’re working. However, a study conducted at Freiburg University in Germany can tell you why most of us seem to have struggled to build up even the most modest nest-egg: insane State largesse, and a complete inability to extrapolate forward what State pensions would one day cost unless proper provision were to be made.

I first spotted this study (although it was actually conducted in 2009) last week as a referenced  source in some tedious EU document about ‘demographic imperatives facing the Union’. I would’ve skimmed it and moved on, had I not by chance stopped at a page while scrolling down looking for the idiots’ summary-version. This was a section devoted to France, and one figure leapt out at me: the pension liabilities of the French State are 6.7 trillion euros.

The Slog had a bit of an epi back in Spring 2010 (just before the election where we jumped off the Titanic onto the Hindenburg) about the Sir Humphreys awarding themselves massive increases in Civil Service pension emoluments after 2006. The technical term for these in government circles is ‘unfunded’. What that means is, senior Whitehall and Town Hall reptiles awarded themselves the increases with nothing in the budget for them, thinking as they did so that a future taxpayer could pick up the bill…..but then, that really wasn’t their concern: they deserved a fat retirement, so why on earth not steal it?

When I first ran this story, I had some quite heavy-hitting mates ring me to say I’d got something badly wrong, and ask was I, as it were, entirely of this world. However, last November, the public accounts committee duly confirmed the original Slog story, noting that ‘Unfunded public-sector U.K. pension obligations across 1,500 public bodies amount to slightly in excess £1.2 trillion’. What the PAC won’t give us is the analysis of how many pinstripes make up the vast bulk of that number. But I was  given sight of the key document in April 2010, and it’s around 16,ooo people. The benefits accruing to these troughers doubled between 2006 and 2009. Parliament never voted on any of it. Technically – in my view – it is very close to being embezzlement; and on a moral basis at the very least, it represents fraud.

However, these are the public-sector pensions where there is a written, legal agreement. Our own measly £90 a week as OAPs we have to take on trust, and it is paid out of current account monies. It costs around £58bn pa, or just over 1,000 for every person in the country – not a bad result, actually: and unless future governments are astoundingly stupid, one that should remain relatively affordable. Despite the spin we get from Coalition handouts, this is amounts to only slightly over half what it costs the UK per annum to be an EU Member State.

To quote directly from the body of the Freiburg Report.

‘This share of GDP is the lowest of all the EU countries studied in this report’

And here’s an extract from the overall summary. Those with high blood pressure should look away now:

‘By contrast, State-funded pension obligations in France and Germany are three times the gdp of those two countries. Together they total 13.9 trillion euros, VERY NEARLY HALF of the pension bills of the 19 nation States studied by Freiburg’s authors, Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige.’

Now, to compare like with like on the us-and-them sum, you simply add Britain’s OAP bill to the fat lying useless incompetent porker  public sector bill, and according to the report that comes to about 94% of our gdp.

Thus, just two EU nations – oh, surprise surprise and bless me, it’s France and Germany – account for half the entire Union’s pension trough – and in both cases, they’ve shown three times the barmy largesse of our lot.

Yet George Osborne more or less accepted today that we will be asked to cough up more IMF monies to the European Funny Farm. Yet Greeks are being asked to starve in order to save five French banks, and a motley collection of German building societies funding Spanish villas. Yet Spain has been forced to completely empty its social welfare and pension budgets in order to survive. Yet all the ClubMeds have been made to feel guilty as part of Brunhilde Merkel’s Wagnerian morality Opera.

I think that maybe here we have, revealed in its full, awful, decaying obscenity, the truth about why the EU cannot be allowed to end, and why its founders would rather eat glass shards than give up on it: for in its current existence, the European Union is a cash-cow based on honouring debt so that Franco-German pensions can continue to be meaningful. Welch on the debts, and the entire construct of a whole continent’s retirement plan ceases to be….but nearly half of that plan involves the inflated retirement expectations of just two countries.

If you thought it was madness to be an EU member State, then the broader demographics underpinning that conclusion bear some examination. According to a UN report quoted by Bloomberg this week, Europe has the highest proportion of people aged over 60 of any region in the world, and that is forecast to rise to almost 35% by 2050, from 22% in 2009.

Now tell me: would you hitch your trading wagon to a bloc where over a third of all its inhabitants will be retired by the time our grandchildren reach middle age…..and the hopeless indebtedness of that bloc means that they will not be consumers, they will be impoverished?

There is not much to commend the contemporary bonkers system of globalised neocon capitalism. But there is nothing whatsoever in these data to support the ridiculous idea that our key trading partner going forward should be the EU.

However, the numbers I quote also raise other even more pressing queries:

1. If the cost of UK State pensions is only 50% per year of the cost of being part of a trading Union with which we have a massive £55bn trading gap, why are the ordinary people of Britain being asked to put off their retirement dates to help support the bloated State pension grandeur illusions of France and Germany?

2. When is the UK political class going to tweek the grubby, grabbing snouts of the Sir Humphreys – just 16,000 of the buggers – and tell them, “Sorry, we don’t remember the PAC voting for anything for you lot after 2006″? Because were they to do so – and there is a diamond-hard commercial point to be made here – I’d say our AAA status would be more or less guaranteed in perpetuity.

I’ll tell you what I think needs to happen. I think the UK, in its dealings with the IMF, Paris, Berlin and Brussels, should start behaving as if we were the Troika in Athens. I think we should say – in a suitably patronising manner: “OK spendthrift grasshoppers – you have had your day in the sun, and now you need help. But if you want our help, then do what we’ve done: get your pension liabilities down to, say, 120% of gdp, and just possibly we can see our way to giving you some some further funds…tranche by tranche, on a monthly basis only, of course.”

There is very little less edifying than Lady Bountifuls shown to have no money, they having previously insisted that the flesh of their ethical being is as the driven snow. The British Government needs to stop apologising, and start flexing its muscles. In their current demise, the EU nations need us. With courage and determination, there is no need why we should depend on them. If Cameron’s Zen veto in Brussels eight weeks ago was a start, then fine. We’ve had the overture: can we now see the rest of the play please?

 

 

71 thoughts on “EU CRISIS SCANDAL: PENSION LIABILITIES OF FRANCE & GERMANY ARE HALF OF EU TOTAL

  1. This should be required reading for every MP and someone should go and have a quiet chat with DC and tell him to ‘get real, old chum, there are no votes in your present path but plenty in an alternative’.

  2. Bloody good data this lot, John. WOW!!!!
    I would say if you could ram this up thick thick snout of any credible politician that this is highly explosive stuff if it could be used intelligently.
    Then, the Sir Humphreys aren’t likely to be pointing it out to their ministers are they?

    • Agreed and I have already sent a link to this article to anyone I can think of who might be interested and even some who might not. We can surely spread the word.

  3. A very important article. Mind blowing. This should be on everyone’s lips. This is where the money is going ultimately. I’m stunned. I hope this goes viral.

  4. Back of envelope calculation; John, your figures sound right to me. 19 years of contributions to state pension here gives us +/- 350£ per week. UK contributions pay us £52 per week (whole exercise of apportionment done with great precision and timely by DHSS, I must give credit to them)

  5. I don’t think for one minute that the present Government is going to do anything to upset their EU masters. Cameron’s veto was just an empty charade.
    Both Cameron and his Chancellor Osborne (like most of the UK political class) are fully bought and paid for Bilderbergers. They sold their soles to Brussels many years ago who now completely own their little arses
    When Brussels says jump Cameron sends out for a trampoline.

  6. This is extra ordinary. I’m so glad I found the slog. Why the hell is this stuff not is the msm? This is what news should be.

  7. The problem is the pensions are unfunded. It’s what’s cheerfully known as pay-as-you-go, which means paid for by your kids, if you happen to have any, otherwise by someone else’s kids. It’s great while the population is growing. When the population begins to age and shrink then the outgo exceeds the income and it becomes plain to all that the thing is a Ponzi scheme.

    What to do?

    Why, bring in more people, obviously! Mass immigration will keep the racket going for another generation. After that, regrettably, the British nation will be no more. Oh sure, there’ll still be people in Britain calling themselves Brits, they’ll just not be the same nation.

    So there you have it, autogenocide as the price of a pension. Oh, well, it will see our time out, as heard some old bugger say the other day.

    The alternative, of course is to fund the pension plan. While astoundingly radical, this is what Canada has actually done. As of September 2011, the fund had net assets of $152,294, with pension plan contributions slightly exceeding pension plan payouts in the current year.

  8. Hi John, Thank you for this lovely article.

    However, in your second paragraph you used the term reptiles, which implies some agility, speed, and movement. I suspect that the word you were looking for is slugs. Slow moving creature that leaves a trail of destruction behind it, invade the host at a slowpace, start feeding, and continues the kill plant in the end. Best killed by tramping on it.

    • i think you mean you mean $152,294,000.
      still peanuts france and germany owe euros15,000,000,000 to there soon to be retired. thats adjusted from canadian dollars to euros

      • woops e daisy..see how a few zeros make all the difference

        canada + $152,294,000,000.
        de+fr – E13,000,000,000,000

      • Yep, billions. And I didn’t say Canadian pensions are fully funded. Just not totally unfunded. Anyhow, with thirty-two times as much space and half the existing population, Canada has much more room than the UK to pack in fresh immigrants to maintain the aging European population.

  9. Our Government seems to have opted for the mass immigration route. Unfortunately this only works if the new arrivals are skilled, wiling and available to work and contribute. It all goes a bit wrong when the masses turn up with a view to working in the black economy and fleecing the social security system. Hence the British version of increase the population by mass unfettered immigration to fund future pensions seems to be something of a failure. Still I suppose the future civil war that will eventual arrive will take everyone’s mind off our terminal economic decline.

    • The implication of what you’re saying, namely, that immigrants have a higher rate of claim for unemployment etc. than the natives, seems so unlikely that I spent several minutes with Google to find evidence to the contrary.

      Astonishingly, your claim appears to be correct. Thus, the Telegraph reports:
      “immigrants from all countries into Britain are more likely to be out of work than the native population.”

      This is totally astounding. To get a job, the immigrants only have to compete with the least competent of the native workforce, yet apparently they do badly even at that.

      Britain must be run by loons, malevolent psychopaths or agents of an alien power.

      • More crap from the Telgraph. Probably comes fromthat nasty ex Ambassador who runs Migration Watch. A real fascist bastard who twists and distorts everything. Show me an unemployed immigrant. Yet to meet one amongst the East Asians and Eastern Europeans. Undoubtedly plenty of Somalis and Albanian refugees playing the sytem. But they are part of the underworld and underclass. .

      • But if OldAsiaHand is right and this is all bollocks, i.e., that there are no unemployed immigrants — except of course that there are, then we can be sure that immigrants are taking jobs off indigenous Brits as one would expect, since the unemployed Brits are the bottom tier of the workforce and understandably, therefore, generally less competitive than the kind of ambitious, energetic person who becomes a migrant.

      • But don’t think that immigrants only compete with those at the bottom of the heap. Open the gates wide and there would most likely be an immigrant to do your job better than you can.

        There must be many very bright people in Asian and elsewhere who would be delighted to raise their income two-, five-, ten-fold by taking a senior position in Whitehall, as a doctor or surgeon or in the business or scientific hierarchy.

        So, anyway, maintains Cambridge economics professor, Ha-Joon Chang, who should know, having himself snagged a top academic post at the expense of a native Brit.

    • There has to be jobs and high paying jobs for that to happen! A minimum wage earner isnt valued at 1 high earner paying in it would take ten minimum wage workers to equal 1 middle class upper wage earner!

      Its a pyramid scheme collapsing under the weight of its own demand!

    • There is an awkward flaw in the mass immigration route. It works while the immigrants are still seeing things from the perspective of their origins. That is, income and living standard expectations are low. But once here, expectations get adjusted. By the second generation, immigrants are no longer immigrants and their expectations equal ours, understandably.

      What then? Well of course we will need more immigrants. So it is a permanent arrangement. We always need to bring in people with (short term) low expectations to work for modest amounts, in the short term. For many, perhaps most, people that would not be a problem but there are, sooner or later, going to be issues of space and especially infrastructure. Sustainability is an issue. I note that our miserable infrastructure has barely changed in the last 20 years despite quite a few more people residing here. To deal with that problem, we need to challenge those sponsoring immigration to explain how our essential infrastructure improvements will be organised and financed. Presumably more people equals more GDP, so in theory the money should be there. But clearly it isn’t. Whatever there was has been spent elsewhere.

    • It isn’t correct. £1.2 trillion is the deficit for all state pensions including OAPs not just for the Sir Humphrey’s. Mervin King’s pension is valued at about £4mil. That would be tops for the Mandarins. The BoE’s pension plan is funded however.

  10. Absolute dynamite JW. In your endless hours of research your instincts must have driven you to uncover this piece. But more importantly you had the nous to extrapolate how powerful this data is. We are all so grateful for this (and the rest). I feel you should seek out the bravest of the political journos (Matthew Norman springs to mind) and persuade them to have these facts writ large to emphasise its import. Furthermore, an MP who is not a career politician, Chris Bryant, who I am positive would be courageous enough to stick his head above the parapet, to bring it into the public consciousness, could do the trick. You could end up being mentioned in despatches over this. (or shot at dawn) :-)

      • Do you think so kentucky? I wrote that in jest but you obviously agree that this is political dynamite, however, any threat to JW would be too huge a price to pay. But I think we both know he won’t just sit on this, it would deny his ‘raison d’etre’.

  11. Politburos cost a lot of money.
    No nation can afford such a large government.
    We all know “the former USSR”.
    The EU?
    it’s not quite as repressive as that but I have a feeling they are working on it.
    All for the public good ,of course.
    Well so they say.

  12. Extreme pensions for drones and parasites are certainly coming under scrutiny over here – but will they ever be curtailed? Who knows! Some tidbits from the case of the ex Finanzminister Hans Eichel who, believe it or not, is an alleged Socialist, or at least a member of the SPD, the party for the working man.

    Briefly, he went to the courts to try to push through a pension claim of €14,500 per month. So, you might ask, what stupendous performances did the guy turn in to justify claiming such a magnificent reward for his dotage.

    Well, he first spent some time as a common or garden teacher, then he was the Oberburgermeister of a provincial town (Kassel) before becoming the Minister-President of Hessen. Eventually he ended up as the Finance Minister in the government of Gerhard Schröder – but treated as just as one minister amongst many. As the Handelsblatt puts it, “Today, Eichel is as popular as the (T)Euro is with restaurant customers”.

    Luckily the judges had the good sense to swat him down and now he has to try and exist on a mere €8,200 per month. BUT, he may yet be able to push through an additional claim for around €2,500 a month from his third occupation – this would be subject to him winning in yet another court action.

    From a discussion forum on the case: “An average employee can never achieve that. The pension entitlement always lies below the last income level, and then there are the contribution thresholds. More than about €2600,- will not be paid, not even for a higher than average earned income.” Or, as the BILD puts it: “An average earner would need to work for approx. 350 years in order to receive such a pension.”

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  14. So basocally germany and france want everybody else to pay their pensioners as they ran out of their own money! Problem is the rest of the EU ran out of everybody elses money too,in fact the whole world ran out of OTHER PEOPLES MONEY!

  15. The Freiburg authors say the “very nearly half” refers to “the 19 nation States studied”, not the whole EU. (I don’t know what difference that would make, though.)

  16. An excellent article. Further proof of the lack of integrity of our current “rulers”; however a ruler is no good unless it is straight.

    • Thanks for that Rui. Glad to see I’m not the only one who noticed it.
      Makes me wonder if somebody had an interest in ‘getting it out there’?
      Nothing surprises me any more.

  17. Leaving aside the top level UK state employees, it is about time the comparison with the pensions schemes in France and Germany (and Spain and Portugal to my knowledge) was made clearer to the UK population.

    Our scheme is, shall we say, deliberately minimalist and nearly everyone should be topping it up with a private scheme – if they can afford it, which many can’t. The UK state scheme provides about half the amount you need to get by on, but (JW don’t forget this!) there are ultra-complex pension credits for the ultra-poor. So the UK outcome is that pensioners are not quite starving, despite the nominal pension amount being absurd. It’s a Brown-style means test, set up to keep quiet the fact that you will survive if you save nothing, probably. But not to provide a decent pension.

    By contrast, the continental system is to charge very large employer contributions (sometimes about 5 times ours) and provide a decent and portable pension scheme for everyone, linked to their work history and final salary. Issues of employment costs apart, I really can’t see why that is a problem, it does not depend on the crooks in the stock exchange or the devious games of boards of directors or the Treasury making weird rules. It is pay as you go via the state, and future liabilities are matched with future income, theoretically! And (here we share a problem) provided there are contribution payers around, all is well. Of course we know about the ‘demographic time bomb’, and so do the continentals who are busy making tiny adjustments to their retirement ages (now 62 in France after a big row). More will have to come in due course, after (eg) the French elections. I predict 65.

    So we have a state system with complex means testing features that allows people to just scrape by without saving, especially if they are in public housing. Outside the public sector there are pension schemes of variable but normally limited scope. For this voluntary part we depend on our gambling den, aka the stock exchange, and investment in very low yield bonds. Very large fees are charged by greedy ‘intermediaries’. The Continentals simply grab the money from employers (and employees) and pay it to pensioners. The total payout is definitely much more than ours. At least in theory, the system is under democratic control and no gambling dens or mixed motives of directors are involved, plus the fees are hidden in the costs of the state and are probably lower. It works, for now. Both state systems depend on PAYG and both will diminish in future due to demographics.

    As for the Spanish and their social security scheme, that has been put into the red by the unplanned (and for a while cancelled) €420/month emergency pay to the long term unemployed, who unlike the UK normally get nothing after the very generous first 18 months or so. This will be at least €20bn per year because there are about 22% of the workforce on the dole with no prospect of short term improvement. The dole is higher than the headline UK amount, but in Spain they don’t get housing benefit (at the rate of £15k per year on average) and all the other things that the UK provides. The Spanish pension system will continue, unless Rajoy is unable to raise taxes in the way he is currently planning. VAT in Spain is only 18%, and there is quite a lot of self-interested Brussels pressure to raise it to the EU average, which is over 20%. He has already raised income and property taxes significantly. The next step I predict will be a further rise in the retirement age to ensure that the predictable spending on state pensions will be roughly in line with a predictable lower level of income. Or possibly a reduction in pensions. But the system will not collapse. Rather, the economy will shrink further due to higher taxation and lower spending power.

  18. Great contribution this, Carys – thanks.
    I get my State jobby next year. It is about 70% of what someone who immigrated 30 years ago gets. Go figure.
    I have a private self-invested drawdown pension; I also have a decent-sized pot to invest….which I took out of Scotwids after they diddled me blind from 2001-2003. Without some success in investing that pot, we’d be in queer street.
    Finally, we rent the UK house to holidaymakers now. Same applies as re the investment pot outside the pension.
    Given say three years of hyperinflation, I reckon we’ll b f**ked by circa 2018. Hence the plan to die of cirrhosis before then.

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