BERLIN, May 22 (Xinhua) -- The German Minister of Labor and Social Affairs, Hubertus Heil, presented his reform to supplement the German basic pension on Wednesday.
According to the draft law, a pension supplement is planned from 2021 onwards for long-term, low-income earners in Germany and will be financed primarily from tax revenues.
"The basic pension is not unconditional, it has prerequisites," said Heil. It will be provided to Germans who had paid pension contributions for 35 years but were still receiving barely more than the basic pension.
According to the German Ministry for Labor and Social Affairs, about three million people in Germany would benefit from the planned pension supplement.
The German Social Democrats (SPD) estimated that supplementing the basic pension would cost around 3.8 billion euros (4.24 billion U.S. dollars) in 2021.
"We have secured solid financing," Heil said, after reaching an agreement with Minister for Finance Olaf Scholz (SPD) on Sunday.
In order to cover the costs, the SPD was expecting 500 million euros of revenues from the European financial transaction tax each year, even though this tax does not yet exist.
The German labor minister also planned to acquire a further 700 million euros by reversing the so-called Moevenpick tax, which was introduced by the government in 2009. It reduced the value-added tax (VAT) rate for German hotel stays to 7 percent from 19 percent.
The German conservative union CDU/CSU responded critically to Heil's plans.
"I appeal to the SPD to withdraw this proposal and to work out a serious proposal," said German Minister for Economic Affairs Peter Altmaier (CDU), adding that serious financing and not "creative accounting" was needed.
Similarly, Minister for Health Jens Spahn (CDU) said that "with such maneuvers, the SPD is destroying the basic pension".
The social democrats were putting "a good idea at risk" out of panic ahead of the European elections and federal elections in Bremen on Sunday criticized the German health minister.
Hermann Groehe, deputy parliamentary faction leader of the conservative union CDU/CSU, described the pension reform proposal as "a billion-dollar violation of the coalition agreement".
Heil rejected these accusations that his reform bill was a campaign maneuver, saying that "I am not making this bill for this purpose".
He, however, acknowledged that his basic pension plans were "a financial feat of strength".
"We will certainly have many more discussions in this coalition", said Heil, adding that he was certain "that we will come to a result" and the basic pension could be introduced in the current legislative period.
The SPD's proposed financing of the basic pension was welcomed by the German Federation of Trade Unions (DGB).
"The unions have been demanding the abolition of the Moevenpick tax and the introduction of the financial transaction tax for a long time," Reiner Hoffmann, president of the DGB, told the German editorial network (RND).
According to a study published by the German Insurance Association (GDV) on Wednesday, younger generations needed to spend about twice as much of their wages as older generations in order to close the pension gap in old age.
"You have to be aware that you are living longer than you think. And the gap in old age is getting bigger and bigger," a spokesperson for the GDV told Xinhua on Wednesday.
Germans who were born in the 1970s would have to save around 4.4 percent of their earned income to close the pension gap in old age, compared to 2.1 percent savings for Germans born in the 1960s, according to the GDV study.
"With the current low interest rates, you simply have to start saving much earlier," said the GDV spokesperson.
