Deadline for avoiding pension crisis in Germany approaching

A paper in the European Journal of Political Economy posits that reforms to the German pension system will be politically viable until the year 2016, when the "politically decisive cohort" will be at the age where they will overwhelm any effort to reform the pension system through the electoral process.

My thoughts on this issue start off with how the young working populace of Germany will respond should pension reforms fail to be enacted as seems likely. One option is emigration; the younger cohorts will have less loyalty to any particular nation, and I think that could be extended to include less loyalty to the EU itself than some might think. I could see Germans emigrating to countries such as Australia or perhaps Canada(?) or even the USA, where the demographic and therefore tax imbalance is not so large. The other option would be to find employment/opportunity in the underground economy, where the tax authorities would have difficulty enforcing their levies. Perhaps holding down a part time legitimate job to maintain appearances, while doing off the books work in the rest of one's time would be an option for overtaxed Germans.

In either case, the result would be a further drop in tax revenue for the pension system making it even less sustainable. So the political outcome might be a bargain where the retirees accept reduced benefits in exchange for avoiding even greater reduced benefits due to a "silent rebellion" if you will, as I outlined above.

One factor that might postpone the pension crisis is the notable migration of workers from the countries newly admitted into the EU (and further east) towards the western countries. I have seen several articles in the business press that have noted a "brain drain" of young and educated workers from places like Romania and Ukraine to western Europe.

I think that the younger age groups tend to generate most of the innovation in developed economies, but capital is generally held by the older age groups. So a bargain will need to be struck between these two groups if aging societies are to maintain consistent economic growth.