This is an audio transcript of the FT News Briefing podcast episode: ‘Germany’s pension crisis’
Marc Filippino
Good morning from the Financial Times. Today is Tuesday, August 26th, and this is your FT News Briefing. Donald Trump says he’s removing a top Federal Reserve official, and the wind farm developer Ørsted received another blow yesterday. Plus, Germany is giving money to kids to invest in the stock market. I’m Marc Filippino, and here’s the news you need to start your day.
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US President Donald Trump said last night he’s firing a governor at the Federal Reserve. It is a major escalation of his attacks on the central bank. Trump said on Monday there was, quote, sufficient reason to believe Lisa Cook had made false statements on mortgage agreements, which gave him cause to fire her.
The Fed declined to comment. Cook has previously said she had, quote, no intention of being bullied to step down. The president has spent months threatening the independence of the central bank. He’s threatened to fire chair Jay Powell over the Fed’s decision to hold rates steady this year and, separately, Trump did remove the head of the Bureau of Labor Statistics a few weeks ago after a weak jobs report. If Cook refuses to step down, it could trigger a constitutional stand-off between the White House and the Fed.
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The Danish wind farm developer Ørsted took a big hit yesterday. Its shares fell 16 per cent. That was after the Trump administration said on Friday that it was stopping a nearly complete project. Here to talk to me about what’s next for the company is the FT’s Richard Milne. Hey, Richard.
Richard Milne
Yeah. Hey there, Marc.
Marc Filippino
So Richard, this project the Trump administration stopped, this is the $1.5bn Revolution Wind project. Tell me a little bit more about it.
Richard Milne
Yeah, so it was designed to provide power for the equivalent of 350,000 homes in Rhode Island and Connecticut, and it was four-fifths complete. They completed all the foundations, 45 of the 65 wind turbines were in place, so they were looking to start operations next year. They got all the permits, and then on Friday, something of a bolt out of the blue, they got told to stop work immediately on it.
Marc Filippino
So they were so close. Why did the Trump administration put a stop-work order on it?
Richard Milne
Well, the official reason was the regulator said they needed to address concerns related to the protection of national security interests, but they didn’t elaborate what they meant by that. I think it’s fair to say that the subtext here is Donald Trump himself really doesn’t like renewable energy, and he’s basically looking at how to stop project by project. And then added on top of that, Ørsted is itself half-owned by the Danish state. And obviously the bad blood between Denmark and Trump due to Trump wanting to buy, well, take control of Greenland from Denmark is pretty strong.
Marc Filippino
Yeah. Not to mention that Rhode Island and Connecticut are both blue states. How big of a deal is this to Ørsted? How is the company doing overall?
Richard Milne
I mean, it’s doing pretty awfully and a lot of that is due to problems in the US. As you mentioned, it shares fell a lot. They’ve fallen a lot recently before this. They’re down nearly 90 per cent from their peak. They have a market cap just now of DKr75bn, and what they’re trying to do right now is have a rights issue for DKr60bn. So almost their entire market capitalisation they want to raise in fresh equity. So it’s gonna be extremely painful for existing shareholders.
Marc Filippino
Richard, what does this tell you about the state of the wind farm industry more broadly? Or is this kind of its own thing with Ørsted?
Richard Milne
It’s definitely not its own thing with Ørsted. I mean, I think if this was any other country other than the US, I mean, you’d be . . . there’d be think pieces about the investment climate and, you know, a government that has approved the project in every way that needs to be done and then arbitrarily just says at the last minute, “No”, it’s a pretty awful signal for investment. I think certainly in terms of any green renewable investments right now in the US, everything has to be up in the air.
Marc Filippino
Richard Milne is the FT’s Nordic and Baltic correspondent. Thanks, Richard.
Richard Milne
Thanks so much.
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Marc Filippino
Elon Musk’s artificial intelligence company is suing Apple and OpenAI. xAI is accusing the two companies of making a deal that breaks antitrust rules. That deal integrates ChatGPT into not only Siri, but also iPhone writing and camera features. xAI says the deal denies rival chatbots the same reach and access to users. It also accuses OpenAI of holding a monopoly in the AI chatbot market. Apple did not immediately respond to a request for comment. OpenAI said, “This latest filing is consistent with Mr Musk’s ongoing pattern of harassment.”
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Marc Filippino
Germany’s retirement system is facing a ticking time bomb. In the next decade, the country’s labour force will decline by 9 per cent and that’s gonna put serious strain on Germany’s “pay-as-you-go” pension plan. Now instead of doing a complete overhaul of the pension system, German Chancellor Friedrich Merz is pushing people towards private savings and investing in stock markets . . .
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. . . and giving them a little money to do so. Here to tell us more is the FT’s Frankfurt bureau chief Olaf Storbeck. Hey, Olaf.
Olaf Storbeck
Hi, there.
Marc Filippino
So tell me, how big of a deal is it for a German chancellor to, you know, tell young people to invest in the stock market?
Olaf Storbeck
Well, it’s definitely a change of tone to the message that previous governments have been sending over the past decades, where the message always was, well, the public pension system is safe and people can rely on it. And I think one important thing to keep in mind is that investing in the stock market is quite an unpopular thing in Germany at the moment. Only 17 per cent of households actually own stocks, ETFs, or actively managed funds compared to close to 40 per cent in the UK and more than 60 per cent in the US.
Marc Filippino
Can you give me a little bit more detail about how poorly the pension system is doing? Like, what are the struggles that we’re seeing right now?
Olaf Storbeck
Yeah. The struggle in the German pension system, the current generation of workers is basically paying the pensions of the current generation of pensioners. And given the workforce is ageing rapidly and people are at the same time living so much longer, the proportion of workers relative to the proportion of people in retirement is changing dramatically. And at the moment, about 100 workers have to support 30 pensioners, and this will grow to more than 40 by 2040. So the burden for the current generation of workers is growing significantly, which obviously means either they have to pay more contributions or what pensioners will get out of the system will shrink and people may face up kind of poverty in retirement. And just the demographics is really going to bite badly over the next decade or two.
Marc Filippino
Olaf, Merz’s government also designed something really interesting: a programme to give children an early start at building a pension. Tell me a little bit more about that. What does that consist of?
Olaf Storbeck
Yes, so what they’ve committed to do is basically a subsidy of €10 a month for every child between six and 18, which then the parents can invest into broad stock market products like ETFs or pension funds. The key point is not that the money itself will then help to fill the pension gap, but it’s more or less a kind of an educational game. It’s very much regarded as a casino by many people in Germany, the stock market and the idea of this new subsidy is to basically give people an opportunity to learn these experiences first-hand and see, well, it’s neither complicated nor particularly risky if you do this over a period of like 10 or 20 years and hence then nudge them towards a kind of broader and deeper investment in the stock market over time.
Marc Filippino
Got it. So the idea is to encourage private investment in the stock market because people can’t rely on the public pension system to fund their retirement. How have Germans reacted to this?
Olaf Storbeck
It depends a bit on who you ask. The trade unions, which represent workers in Germany, are quite sceptical and they are kind of calling on the government to fix the pay-as-you-go pension system instead. Private pension experts at the same time are saying it’s too little, too low and are calling on the government to do much more sweeping reforms to encourage private pensions as the new plans are too limited to really have an impact.
Marc Filippino
So, Olaf, are there any lessons that other countries should be learning based on what’s happening in Berlin right now?
Olaf Storbeck
A key lesson is not to ignore demographic trends for too long, because the longer you wait, the more draconian has the response to be. And the other lesson I think is that encouraging people to invest in low-fee, diversified stock buyer portfolios is something that governments should do early on and vigorously.
Marc Filippino
That’s the FT’s Olaf Storbeck in Frankfurt. Thanks so much, Olaf.
Olaf Storbeck
Cheers.
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Marc Filippino
You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.