Study: Germany tops European neighbours in social spending

Germany spends more on social security than its European neighbours, according to a study by the German Economic Institute (IW) released on Monday.

The report by the employer-aligned institute found that 41% of Germany's total expenditure goes to social spending, with nearly half of the sum directed toward old-age pensions.

The Nordic countries as well as Austria and Switzerland each spend about 40%, while the Benelux states allocate 38%. The EU average stands at 39%.

Germany also ranks among the highest for health spending at 16%, putting it on par with the Benelux and Nordic countries.

Amid political tensions over pension reform and as the lower house of parliament enters budget week, the IW urged the government to curb further growth in state activity, particularly in social and health spending.

The study analyzed public expenditure from 2001 to 2023 and compared Germany with neighbouring states regarded as economically and culturally similar.

Administrative costs were also comparatively high, rising from 7.2% to 11% of total spending over the period.

By contrast, Germany ranked last in education spending at 9.3%, far behind Austria and Switzerland. Germany also lagged in staffing and public investment.

Defence spending has risen most sharply in Nordic countries since Russia's 2022 invasion of Ukraine, reaching 3.4% of total expenditure.

Germany held steady at around 2.3% of expenditure, or 1.1% of gross domestic product (GDP). Under new NATO targets, alliance members are due to spend 5% of GDP on defence and infrastructure annually.