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The boss of insurer Allianz has warned that Germany risks becoming the “sick man of Europe” and predicted its social security system could collapse within a decade unless the government cuts spending.
At Allianz’s annual media briefing on Wednesday, Oliver Bäte said: “We’re back to where we were in 1997 . . . when Germany was called the sick man of Europe.” He added that while unemployment remained well below the 5mn mark of the time, the country faces mounting risks mainly from unsustainable growth in healthcare and welfare costs.
“My prediction is that in 10 years, our social security system will be on its knees,” he said, adding that Germany “cannot afford” for GDP to be static while healthcare spending grows “by 6, 7 or 8 per cent a year”.
“Mathematically, you don’t need to be a genius” to see where that leads, he added.
Germany’s economy has contracted in each of the past two years, and while its public spending on social protection remains high by OECD standards, it has grown at a comparatively modest rate. Still, economists have warned of looming deficits in the pension system as the baby boomer generation — born between the mid-1950s and mid-1960s — reaches retirement age.
“Our pension system is not functioning and we need high returns,” he said but he added that he was concerned about the high valuations of US tech stocks, singling out Nvidia and Tesla.
“Do we really believe a company like Nvidia is worth $4tn? Or Tesla?” he asked. “Is it really good to hold a huge part of your portfolio in these things? I’m not giving investment advice, but in the world we’re living in, I’d be a bit more careful.”
Bäte, who has led Allianz — one of Europe’s largest insurers and the parent company of asset manager Pimco — since 2014, is known in Germany for his outspoken views. He has previously advocated for higher inheritance taxes and reducing paid sick leave entitlement, among other things.
