1 Welcome

Ladies and gentlemen,

Thank you very much for inviting me as guest speaker to this event that is so steeped in tradition.

The “Jahresköste” annual banquet of the Rostock Merchants’ Association has roots going back centuries. However, for five decades in the 20th century, it did not exist. The socialist planned economy of East Germany clearly viewed the entrepreneurial spirit of independent merchants with suspicion. It was only German reunification and the transition to the social market economy that allowed this tradition to undergo a revival. 

Tomorrow, it will be 36 years since Germany was reunited. And I very much look forward to joining in with the celebrations.

For the Bundesbank, 1 July 1990 was certainly a particularly exciting occasion: on that day, the Deutsche Mark became the official currency of East Germany. I am sure that many of you will still be able to remember that time. 

Supplying the entire country with cash in one fell swoop was quite a logistical feat, especially since there was relatively little time to prepare. And the Bundesbank has had a branch in Rostock since 1990.

As is the case every year on 3 October, we are now again looking at statistics comparing the former East Germany with the former West Germany. For example, (nominal) economic output per capita is still around 28 % lower in the former East than in the former West.[1] However, such blanket East-West comparisons mask the fact that there are economically strong and structurally weak areas in both parts of Germany.

There are also considerable differences within the state of Mecklenburg-West Pomerania itself. You know this better than I do. Booming domestic tourism, the maritime economy, and the energy transition are especially benefiting the coastal regions of Mecklenburg-West Pomerania. By contrast, structurally weaker areas, especially in parts of West Pomerania, are facing greater challenges.

In the Hanseatic cities of Rostock, Wismar, and Stralsund, economic structures have changed significantly since the decline of the traditional shipyard industries, and this structural change is still under way. Rostock, in particular, has developed into a successful location for science and technology with innovative companies. 

And, on top of that, it is very beautiful up here! It is no wonder that so many Germans like to come here on holiday.

2 Germany’s economy: Economic upswing, but potential growth remains weak

In economic terms, Germany’s current situation is not too bad at all. In the first half of 2026, the economy performed considerably better than had been expected just a few months ago. It is on the road to recovery. Given the burdens arising from tariffs and the conflict in the Middle East, this is quite remarkable. 

We may well see real economic growth of around 1 % on annual average. After three years of standstill, this would actually be something of a surprise.

One driver of economic activity is the Federal Government’s fiscal package, that is the debt-financed additional government expenditure focused on defence, infrastructure, and climate protection. At present, strong stimulus is also coming from foreign demand. Germany, as an export nation, is currently benefiting from an astonishingly robust global economy.

However, the ongoing recovery should not prevent us from working specifically to strengthen our structural growth factors.

According to estimates by our experts, the potential growth of Germany’s economy in 2026 amounts to just 0.4 %.[2] This describes how fast potential output is growing, and thus represents a kind of medium-term to long-term trend growth. One decade ago, it was still growing three to four times faster. 

There are three main reasons for this decline: there is an increasing shortage of labour as the baby boomer generation enters retirement, enterprises are investing only little, and productivity is barely rising.

In order to gain more momentum in the economy – that is, if we want to see growth rates of 1 % or more on a regular basis again in Germany – we need to tackle the aforementioned weaknesses.

First, we need to counter the demographically induced decline in the labour supply. We could do so, for example, by providing incentives for more women to work full-time. In this regard, eastern Germany has always been ahead of western Germany.

We could stop giving older people incentives to retire prematurely. And we could enable regulated immigration into the labour market. However, the latter requires that people from other countries are also welcome here. Without immigration, we will not be able to maintain our prosperity. 

Second – and I am probably preaching to the choir here – it must be made easier for businesses to operate: through faster administration that is as entirely digital as possible, through reduced bureaucracy, and ideally also through central points of contact that bundle all necessary official processes, for example when founding a company. Then the propensity to invest will also rise again.

Shortly after the last Bundestag election, I gave a speech setting out in depth what would need to be done.[3] I do not want to repeat this in detail here today. However, one and a half years later, it is clear to me that the Federal Government is tackling many of these issues.

I therefore think it is inappropriate to accuse the government of doing too little for the economy. I regularly attend cabinet meetings and can assure you that awareness of the problems is there – and the will to solve them is there, too.

However, it is also clear that some things could be tackled even more quickly and with greater determination. As a case in point, the pension reform shows how difficult it is to implement reforms in the current political situation. 

3 The debate surrounding the pension reform

It is clear that pension finances are under pressure. The younger generations are getting smaller and smaller, while people are living longer and the population is thus getting older and older. At present, around 800,000 young people reach working age each year, while 1.2 million reach retirement age.

Rising life expectancy is, in itself, a good development. However, with regard to pensions, it changes the ratio of contributors to recipients. Figuratively speaking, the crew on deck is getting smaller, while the number of passengers is getting bigger.

The Pension Commission has now put forward a convincing response to the financial challenges posed by demographic ageing.[4] Amongst other things, it proposes linking the retirement age to life expectancy, so – to stick with the metaphor – to slightly push back the age at which you can let go of the tiller.

The Bundesbank had already proposed this years ago. If we live longer, we also have to work longer. Specifically, the proposal envisages raising the standard retirement age by two-thirds of the rise in life expectancy.

At present, however, most employees already stop working before reaching the standard retirement age. A particularly large number of people take advantage of reduction-free pensions after 45 years of contributions. 

The Pension Commission wants to completely abolish these reduction-free pensions and make exceptions only in cases of hardship. But there is resistance against this. 

It is often justified by the argument that people who have worked hard physically for 45 years have “earned” a reduction-free pension. Here, in eastern Germany, it is also argued that many people have hardly saved any wealth. Which is also true.[5]

The fact is, however, that those who make use of early reduction-free retirement are disproportionately insured persons with high pension entitlements who are in the best of health.

It used to be said that we Germans are a people of “poets and thinkers”. But the pension debate sometimes gives the impression that we are a people of “roofers and tilers”. 

There are, of course, people who have worked hard physically over many years. However, they do not count among those who typically benefit the most from this arrangement.

People who are no longer able to work for health reasons can be supported in other ways. But people who are still able to work should not be prevented from doing so through financial incentives.

Those who absolutely want to retire early may do so. However, this should not come at the expense of other contributors. But, instead, with appropriate reductions. 

Another key proposal by the Pension Commission is the introduction of a mandatory funded pension component based on the Swedish model.

We also think this is a very sensible idea, even if it causes the overall contribution rate to rise temporarily. Over the long term, it will pay off to take advantage of the yield opportunities on the capital market. In the short term to medium term, however, building up capital stock will place an additional strain on contributors.

The easing effect from the end of reduction-free early retirement would therefore be all the more important.

Should the implementation of the pension proposals fail due to this point of contention, Germany’s ability to reform would be seriously brought into question.

If it succeeds, however, this would not only make an important contribution to the sustainability of pension finances. It would also improve competitiveness and the macroeconomic growth outlook. 

4 The digital euro

Ladies and gentlemen,

The future course of our country’s economy is only partly in our own hands. Because, as a cosmopolitan country, as a trading nation, we are also affected by what happens around us, both on land and at sea. Blockades of straits, tariffs, wars – all of these have an impact not only on us in Germany. All of Europe must overcome them. And we are doing well doing this together. 

Trade policy, for example, is decided at the European level. And monetary policy is set uniformly for the entire euro area. Because, on their own, each European state is too small to have influence on the international balance of power – even Germany is too small for this.

In light of the global challenges, we in Europe need to work together even more closely. We need to make it easier for the large amounts of savings to be used for investment in Europe. The key word here is the Savings and Investments Union. As a matter of equal urgency, we also need a digital single market. 

These are difficult tasks – I know. 

In addition, our digital infrastructure is far too dependent on non-European providers. In order to ensure that we do not make ourselves open to blackmail, we Europeans should strengthen our digital sovereignty.

One important contribution that the Eurosystem can make in this regard is the introduction of the digital euro. This is because, in payments, too, Europe is highly dependent on non-European systems and service providers.

Mastercard, Visa, PayPal: When you pay digitally today, US companies are almost always involved.

Payment systems are part of critical infrastructure. This applies to the supply of cash, which is ensured by the Bundesbank through its network of branches, but also to electronic payments.

With the digital euro, we will reduce this dependence. However, this is by no means the only benefit that it offers. 

In practice, most people will add digital euro to a digital wallet on their mobile phones. They will be able to use it to pay in shops, order online, or send money to others. And this will be easy, secure, and cross-border throughout the entire euro area.

What distinguishes it from other digital means of payment?

While we often leave behind extensive data trails when using commercial payment providers, the digital euro collects only the most necessary data. And those who use the digital euro offline will pay almost as anonymously as they do with cash. Using this function, the digital euro flows directly from device to device. This is also practical if you have a loss of electricity or a poor internet connection. 

In addition, the digital euro will ensure greater competition in the payment services market. This will please the retailers among you, who today often have to pay high transaction fees for card payments.

The fact that the digital euro is not yet so well known among the general public is due to the fact that no final decision has yet been made on whether to introduce it. However, I am confident that Brussels will approve it this year.

As various fanciful claims are circulating on the internet and social media, I would like to make the following clear:

The digital euro is not intended for surveillance of the general public. On the contrary, privacy protection will be a major priority – and a higher priority than with many of the digital payment solutions that are commonly used at present.

It will also not be programmable, but freely usable. Nevertheless, private payment service providers will be able to offer additional innovative functions, for example automatic ticket refunds if a train is cancelled.

The digital euro will not undermine private European payment solutions, especially Wero. Instead, private providers can benefit from the infrastructure provided free of charge and offer their own solutions throughout the euro area.

And, most importantly: the digital euro will not replace cash, but complement it. Anyone who, like me, wants to pay with notes and coins in the future, too, will be able to do so.

From 2029 onwards, you will have an additional option to choose from.

And then, in a few years’ time, perhaps you will be able to use the digital euro to make your donations at the Jahresköste.

5 Conclusion

Ladies and gentlemen,

The word “Jahresköste” reminds me that we have to adhere to a strict schedule here. So I must now bring my speech to a close.

However, please allow me a brief closing thought.

I understand that change gives rise to apprehension. But this must not lead to change being prevented entirely. 

If we want our social security systems to remain affordable and the economy to become more competitive and gain momentum again, we cannot cling stubbornly to the status quo. We must be ready for change, even if it entails burdens.

I am convinced that, if people feel that unavoidable burdens are being distributed fairly, then they will also be willing to support reforms.

In the monetary system, too, we must not remain obstinately attached to the way things are. We need to find an answer to the fact that cash is being used less and less and is unable to be used in the digital space at all. With the digital euro, we will have the option of using central bank-issued money digitally, too. 

But, before you pay me a little extra to stop talking, I will do so voluntarily and say: Thank you for listening. 

Footnotes:

1. Federal Statistical Office (2026), Die Wirtschaft ist gewachsen.
2. Deutsche Bundesbank (2026), Forecast for Germany: Energy price shock fuels inflation and slows the economic recovery, Monthly Report, June 2026.
3. Nagel, J. (2025), Economic policy measures to boost growth in Germany, speech held at the Berlin School of Economics, 10 March 2025.
4. Pension Commission (2026), Empfehlungen der Alterssicherungskommission; Deutsche Bundesbank (2026), Pension reform, Monthly Report, August 2026.
5. Deutsche Bundesbank (2026), Household wealth and finances in Germany: Results of the 2023 household wealth survey, Monthly Report, April 2025.