In the largest country in the EU, they want to raise the retirement age to 73. What about Latvia?

Experts advise the German authorities to raise the retirement age to 73 years. As Ausnews reports, this is necessary because the population is aging, and the economy is barely growing.

Rescue from Collapse

In Germany, there are proposals to raise the retirement age to 73 years: this measure is driven by a complex of reasons. Key among them are demographic decline and a lack of dynamism in the economy. German experts, seeing that the Danes have already decided to increase it to 70 years, have proposed their own, even stricter option for Germany. This process is planned to be completed by 2060.

This measure is seen as a necessary condition to save the pension system from complete collapse. According to data from BILD, this recommendation is justified by the growing difficulties in the country's economic sphere. The document states that for several years, Germany's economic growth has been stagnant. Meanwhile, other countries with comparable economies are demonstrating much faster development.

Among the root causes of the current situation, analysts highlight sluggish labor productivity growth as well as deep, systemic demographic problems.

Time to Reassess

These two problems are also characteristic of Latvia. As recently reported by Otkrito.lv, IMF experts recommend that the country's government adopt a comprehensive approach to mitigate the effects of an aging population and improve pension adequacy — for example, implementing an active employment policy to increase labor force participation, encouraging retirees to continue working, and linking the retirement age to increases in life expectancy.

Responsible institutions are advised to increase contributions to the mandatory pension plan, enhance the returns of the second and third pension levels, and make the third level more attractive — for instance, by encouraging employers to make contributions on behalf of employees or introducing automatic enrollment with an opt-out option.

As noted by the IMF, the government needs to create a financial "safety cushion" to counter medium- and long-term pressures on the pension system. Fund experts recommend increasing tax revenues by reducing tax benefits and subsidies for fossil fuels, increasing income from property taxes, and rationalizing expenditures.

Among other proposals are active employment policies to increase labor force participation, as well as incentives for retirees to continue working and linking the retirement age to life expectancy. The latter idea essentially amounts to raising the retirement age, as life expectancy in Latvia is increasing.