German Firms Face Severance Costs 12 Times Switzerland's as Economic Forecast Slides
12.06.2026 - 12:26:05 | boerse-global.de
Economic pressure on Germany’s labor market is intensifying. The Bundesbank has slashed its 2026 growth projection to just 0.5 percent, citing high energy prices linked to geopolitical conflicts. Inflation is expected to sit at 2.9 percent, and the central bank sees a slight dip in employment ahead.
Against that backdrop, Veronika Grimm, one of Germany’s so-called economic wise persons, is pushing for far-reaching changes. She wants looser dismissal protection, pension cuts, and a sharp reduction in red tape and taxes. Her core argument: Germany’s current rules are too rigid. They deter innovative companies and block necessary adjustments, she said in mid-June.
The cost of workforce reductions illustrates her point starkly. A job cut in Germany costs employers an average of 31 months’ salary per affected position, according to the data behind Grimm’s critique. In Switzerland, where employers have broad freedom to dismiss staff, the figure is just 2.5 months — a factor of twelve.
The financial toll is already massive. Since the start of 2024, DAX listed companies alone have racked up around €16 billion in severance payments. Sentiment in the governing coalition is shifting: there are early signs of openness to making the rules more flexible.
Grimm’s proposals go beyond dismissal costs. She advocates raising the retirement age and trimming pensions linked to child-rearing years — the “Mütterrente” — as well as the “Rente mit 63” early-retirement scheme. Bringing civil servants into the state pension system, she dismissed as a short-term fix.
Her push is part of a broader reform process. On June 10, representatives of the black-red coalition met unions and employers for a three-and-a-half-hour summit at the chancellery. The agenda covered labor markets, social insurance, tax policy, and cutting bureaucracy. Chancellor Merz called on citizens to contribute ideas the following day. A comprehensive reform package is supposed to be ready by mid-July. The coalition committee on July 1 is seen as the critical milestone.
A study co-authored by Grimm and economist Christofzik on June 10 proposes a 30-point package. Technological progress paired with social reforms can deliver the biggest impact, the authors argue.
The pushback is sharp. Employers’ president Rainer Dulger demands swift change. Unions and the VdK social association warn against cuts at the expense of social security. The German Trade Union Federation (DGB) is calling for a balanced approach.
