jens weidmann : demographic challenges in germany speech by dr jens weidmann, president of the deutsche bundesbank, at the wirtschaftsgesprache am main economic talks, hosted by wirtschaftsinitiative frankfurt / rhein - main e. v., frankfurt am main, 27 november 2014. * * * introduction mr bender, ms reinhardt - lehmann, ladies and gentlemen. it gives me great pleasure to be here with you today and thus to be able to accept the invitation which mr bender and ms reinhardt - lehmann sent me some time ago. not only did planning ahead play a role in finding a date for today ’ s economic talk, it will also be the central theme of my remarks today. as you will no doubt have gathered from the invitation, i would like to talk to you today about the demographic challenges that germany faces, a topic which is also likely to be familiar to you by another name : the ageing of the population. on the subject of ageing, the american poet ezra pound once said, “ the older one gets, the more one appreciates the art of constructive silence. ” in this regard, it appears that i am obviously not yet old enough. and what is more, silence is not particularly entertaining, especially if you have been invited to deliver a speech. the subject of ageing makes most of us uneasy, both with a view to ourselves and to society as a whole. this is probably mainly because getting older is unavoidable and, as well as ideally bringing the wisdom that comes with old age, is also associated with other, more negative side effects. and anyway, who wants to resign themselves to the inevitable? but it is precisely because it is inevitable that we must face up to it. for the next few minutes, i would therefore like to show you, from an economic perspective, how demographic change in germany will develop, what macroeconomic impact it may have and how policy - makers should try, as far as possible, to deal with this impact. the political response to the demographic challenge will help to decide whether the german economy can retain its leading position in many areas. demographic trends in germany let me first briefly outline the demographic trends that await us, with the help of the federal statistical office ’ s 12th coordinated population projection from 2009. based on certain assumptions regarding the birth rate, life expectancy and net immigration, the federal statistical office predicts that, by 2060, germany ’

gentlemen, when we look at things from an economic perspective, what is known as potential growth is a particularly relevant factor. potential growth is normally defined as the aggregate growth that can be achieved when utilisation of all production factors is normal over time. economic potential growth cannot be observed directly, meaning it cannot be measured directly either. instead, it has to be estimated as precisely as possible. i don ’ t intend today to go into the methods used and the imponderables they entail. however, i think the connection between demographic trends and economic potential growth can be summed up with the following words. regardless of the uncertainty surrounding estimates of this kind over long periods of time, german potential growth is likely to be weaker in future than in past decades due, above all, to the demographics - driven decline in the number of hours worked. bis central bankers ’ speeches and yet, the question does arise in this context whether, given the declining and ageing society, the expansion rates of past decades can serve as a suitable yardstick for advanced economies. ultimately, however, this has been a valid question in germany for quite some time now. if we compare the average growth rates of the last few decades, we find a consistently downward trend. in the 1970s we were at just under three per cent. since the turn of the century, it has been little more than one per cent on the whole. thus, when looking ahead, it would probably be more useful to adopt a per capita perspective and compare germany ’ s relative growth position with that of similar countries. but such a forward - looking comparison does not put germany in a particularly good light either. according to estimates by the oecd in its report entitled looking to 2060, the german economy will generate the second slowest growth of all 42 countries in the study in the period up to 2030, and the slowest growth up to 2060. per capita growth looks somewhat better because of the falling population. however, here too, germany is mired in mediocrity by european standards, according to the oecd. faced with these prospects, our economic policy - makers would do well to follow the path of sustained growth all the more vigorously and hence to fight back. to this end, measures need to be taken which heighten the ability primarily of the private sector to adapt, innovate and invest. there are ultimately a number of different approaches towards achieving those objectives. these include the areas i have already looked