Germany’s social spending has climbed to a record high as demographic shifts and rising healthcare costs for the elderly strain public finances, the Ifo Institute said on Monday.
Social expenditures rose by €104 billion between 2019 and 2025, an 11.5% increase adjusted for inflation, according to research by the Munich-based think tank. The share of the social budget relative to broader economic metrics expanded from 29.6% to 32% over the same period, marking a new peak.
More than 70% of last year’s total social spending was attributed to costs associated with the aging population and illness-related care, the Ifo Institute found. Since 1992, over 80% of the real growth in social expenditures has been driven by these factors, with additional pressure from higher federal pension payments and increased healthcare spending for insured elderly citizens.
The weak economic performance in recent years has compounded the issue, as the social budget has expanded at a faster pace than Gross Domestic Product (GDP), Ifo researcher Emilie Hoeslinger said. “The social budget is growing faster than GDP, which is why the weak economy is also contributing to the increase in the social budget’s share,” she noted.
The findings underscore the long-term fiscal challenges facing Europe’s largest economy as it grapples with an aging population and rising healthcare demands.
