Asmussen’s Pensions Pivot Tests Hunger for Top Office

Photographer: Andrew Harrer/Bloomberg

Joerg Asmussen, Germany's deputy minister of labor. Close

Joerg Asmussen, Germany's deputy minister of labor.

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Photographer: Andrew Harrer/Bloomberg

Joerg Asmussen, Germany's deputy minister of labor.

Joerg Asmussen’s new political masters in Berlin are making him eat his central banker’s words.

As deputy German labor minister, Asmussen has been put in charge of making good on the government’s pledge to lower the retirement age to 63 from 67 for some workers. That contrasts with his stance at the European Central Bank, where he warned as recently as last summer that Germany risked relapsing into economic stagnation if its competitive edge slipped.

Asmussen’s pivot is the cost the former ECB Executive Board member must pay to mitigate his association with the financial markets and earn the trust of his Social Democratic Party, a prerequisite for any future shot at heading the Finance Ministry where his career in government began. Pensions are a topic at a German coalition policy retreat on Jan. 22-23.

The Labor Ministry is a “political minefield,” Juergen Falter, a professor of politics at the University of Mainz, said by phone. “Political disputes over the pension reforms are a foregone conclusion. It’s far from clear that Asmussen can earn his spurs with this and go on to become a minister.”

Asmussen, 47, is returning to Europe’s hub of political power after serving as deputy finance minister and Chancellor Angela Merkel’s troubleshooter during the euro-area debt crisis until she nominated him to the ECB in 2011.

When Merkel kept her fellow Christian Democrat, Wolfgang Schaeuble, at finance following her Sept. 22 election victory, her SPD coalition partner took the Labor Ministry and gave Asmussen his ticket back to Berlin from Frankfurt. He took up his new post on Jan. 8.

‘Best Option’

“It shows that he is able to switch positions,” said Andrea Roemmele, a political scientist at the Berlin-based Hertie School of Governance. “If he manages the pension reform well for the SPD, Asmussen is in a good position for a higher post in the future. The best option is the Finance Ministry.”

Merkel’s need for a coalition partner was a boon for Asmussen and the Social Democrats, whose price for backing her third term included a national minimum wage and the plan to allow earlier retirement for people who have worked for 45 years or longer. Both policies fall within the remit of the Labor Ministry. The pensions deal, enshrined in the coalition accord signed Dec. 16, rolls back Merkel’s first-term decision to raise the standard retirement age to 67 from 65.

Asmussen’s message to Germans sounded different when he was at the ECB. On an outing to Dautphetal-Buchenau, a town of historic half-timbered houses 75 miles (120 kilometers) north of Frankfurt, he ticked off seven “construction sites for reform” that Germany needed to work on, from demographic change and university education to taxes and income equality.

‘Sick Man’

“If we don’t keep up the reforms now, we’ll be the sick man of Europe again in five to 10 years,” he said in the speech on Aug. 27, one of at least three such public warnings by Asmussen since late 2012. He declined to be interviewed for this article.

As Merkel and the Social Democrats drafted their coalition agenda in the fall, her independent council of economic advisers warned against backtracking on the labor-and-welfare overhaul carried out by her SPD predecessor, Gerhard Schroeder, in the face of opposition from his own party. Merkel credits his program with helping to restore German competitiveness.

Once her coalition was set, Asmussen left the ECB two years into an eight-year term, saying he wanted to spend more time with his partner and two young children in Berlin.

While President Mario Draghi said he’ll miss his ECB colleague, Asmussen is suspect to his party because of his years at the Finance Ministry before the global financial and economic crisis began in 2008.

Party Standing

“Asmussen is burdened by his past,” Michael Mueller, a Social Democrat and former deputy environment minister, said in an interview. “German financial markets were liberalized on his watch. If he does a good job at the Labor Ministry, he may improve his standing within the party.”

That means meshing with his new boss, Labor Minister Andrea Nahles, a fourth-term lawmaker whose SPD roots go back to when she headed the party’s youth wing in the 1990s. Asmussen, a University of Bonn-trained economist who hasn’t held elected office, worked in the Finance Ministry from 1996 to 2011.

Getting ahead in the SPD requires accepting the widespread view in the party that “it has lost elections by supporting economic modernization,” Manfred Guellner, head of the Berlin-based Forsa polling firm, said by phone.

“Asmussen has espoused policies that are at odds with what he’s committed to now,” Guellner said. “He’s sharply shifting position against his own better judgment.”

To contact the reporter on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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