German retirees to get hefty pension increase in July

An elderly couple sits on a bench in a park in Gelsenkirchen, Germany, Wednesday, May, 14, 2014. German retirees will get a hefty pension increase this year, a result largely of higher wages in Europe's biggest economy as inflation has climbed sharply, the government said Tuesday. The Labor Ministry said that pensions will increase by 5.35% in the former West Germany on July 1 and by 6.12% in the formerly communist east. There was no increase in the west last year and an increase of 0.72% in the east as the economy was hit by the coronavirus pandemic. (AP Photo/Martin Meissner, File)

BERLIN (AP) — German retirees will get a hefty pension increase this year, a result largely of higher wages in Europe's biggest economy as inflation has climbed sharply, the government said Tuesday.

The Labor Ministry said pensions will increase by 5.35% in the former West Germany on July 1 and by 6.12% in the formerly communist east. There was no increase in the west last year and an increase of 0.72% in the east as the economy was hit by the coronavirus pandemic.

Labor Minister Hubertus Heil said that, “because we managed in Germany to keep the labor market stable in the (coronavirus) crisis,” the financing of the pension system is in good shape and the big increase is possible.

He said that “21 million retirees in Germany who ... kept Germany running during their working lives will benefit from this.”

Rises in German pensions are linked largely to wage developments. Inflation has added to upward pressure on wages — it stood at 5.1% in Germany in February, before the economic impact of Russia's invasion of Ukraine started to be felt in earnest.

The latest increase will bring pensions in the less prosperous east to 98.6% of those in the west, which is home to most of Germany's population. The gap is supposed to be eliminated altogether by mid-2024.

Separately, Chancellor Olaf Scholz's Cabinet agreed last month to raise Germany's minimum wage to 12 euros ($13.24) per hour in October, making good on a key pledge in the center-left leader's election campaign last year. It currently stands at 9.82 euros.