Pension Tsunami & Debt Wave: The Shocking Lesson – What Germany’s Stagnation Must Learn from Argentina’s Radical Cure

Germany's economy at a crossroads – a warning from Argentina

At the beginning of the 21st century, the global economic landscape presents a fascinating yet disturbing paradox, one that is more evident in few countries than in Germany and Argentina. On the one hand, there is Germany, which for decades was considered the epitome of economic strength, stability, and a social market economy. But this model is showing obvious cracks: a stagnating economy, a growing mountain of debt, a demographically collapsing pension system, and a noticeable backlog of reforms are paralyzing the country. Europe's former locomotive is in danger of ending up on the sidelines, trapped by the inertia of its own success.

On the other side is Argentina, a country that for over a century has served as a textbook example of economic volatility, political instability, and institutional failure. Recurrent sovereign defaults, hyperinflation, and social crises have systematically destroyed public trust in the state and its elites. But from the ashes of this perpetual collapse, a radical, high-risk experiment is emerging: a libertarian government is attempting to use unprecedented "shock therapy" to chainsaw through the shackles of the past. The results are as paradoxical as the starting point: macroeconomic indicators are stabilizing while large segments of the population are plunging into deeper poverty.

This report juxtaposes these two opposing developments. It analyzes the structural causes of Germany's malaise and the brutal logic of Argentina's radical cure. It does not simply compare economic data, but rather engages in a deeper investigation of the underlying models, political cultures, and societal resilience. The central question is: Can Germany, rigid in its stability, learn anything from Argentina, of all places, whose instability is forcing it into radical change? The answer lies not in adopting specific policies, but in the critical self-reflection triggered by confrontation with an extreme alternative. It is an analysis of two different responses to a national crisis – one insidious and paralyzing, the other acute and brutal.

Germany – The gradual decline of a giant?

Germany's current situation is characterized by a series of profound challenges that go far beyond cyclical economic fluctuations. They are structural in nature and rooted in an economic and social model that has been successful for decades but is now reaching its limits. The problems in public finances, the pension system, and economic growth are symptoms of a deeper crisis – the crisis of a system that is in danger of becoming a victim of its own success.

The Burden of Debt: A Nation Living Beyond Its Means

The public perception of Germany as a haven of fiscal solidity is increasingly being called into question by recent developments in government debt. Figures from the Federal Statistical Office paint a clear picture: At the end of the first quarter of 2025, the total public debt amounted to €2,523.3 billion. This marks a further increase and continues a trend that has accelerated since the coronavirus pandemic and the outbreak of the war in Ukraine. By the end of 2024 alone, debt had already reached a historic record of over €2.5 trillion.

This immense sum is distributed among the various levels of government. The federal government bears the brunt of the burden with approximately €1,733 billion, followed by the states with approximately €615 billion, and the municipalities and municipal associations with approximately €174 billion. The dynamic is particularly alarming: Debt is rising continuously at all levels. In the first quarter of 2025, the states' debt grew by 1.4%, and that of the municipalities by as much as 3.0%, compared to the end of 2024. The federal government also recorded a slight increase, driven primarily by the disproportionate increase in debt for the "Special Fund for the German Armed Forces," whose debt rose by 12.8% in just one quarter.

When applied to the population, this results in per capita debt that exceeded the €30,000 mark at the end of 2024. Every citizen, from infants to the elderly, carried a debt burden of €30,062, representing an increase of €669 over the previous year. These figures illustrate that this is not an abstract problem, but a concrete burden that future generations will have to bear.

A deeper look into the history of government debt reveals that the use of so-called special funds or extra budgets to finance extraordinary events has a certain tradition. Instruments such as the "German Unity" Fund to finance reunification or the Financial Market Stabilization Fund during the 2008 financial crisis were political responses to singular historical challenges. What has changed recently, however, is the apparent normalization of this instrument. The establishment of massive new special funds, such as the €100 billion package for the Bundeswehr or hundreds of billions for climate protection and infrastructure, shifts the logic.

This creates a kind of shadow budget that exists parallel to the regular federal budget and whose spending is not subject to the strict rules of the debt brake enshrined in the Basic Law. This practice renders the actual budget situation less transparent and undermines the disciplinary effect of regular budget processes. It is a political solution to a structural financing problem, but one that could undermine the state's fiscal credibility in the long term. The practice of crisis financing, once reserved for historically exceptional situations, is becoming a standard political tool, signifying a dangerous normalization of debt-financed government spending.

The debt brake: golden cage or necessary shackle?

At the center of the German fiscal debate is the debt brake, enshrined in the Basic Law. It has become both a symbol and a battleground for a deep political and ideological conflict over the country's future direction. The debate over its retention, reform, or abolition has brought the "traffic light" coalition to the brink of collapse and is shaping the election manifestos of all major parties for the upcoming federal election.

On one side of the spectrum are the advocates of strict fiscal discipline. The CDU/CSU and the FDP view the debt brake as an indispensable anchor for stability and intergenerational equity. The CDU/CSU argues with the motto "Today's debt is tomorrow's tax increase" and plans to conduct an "honest audit" if they take over government to scrutinize all spending and subsidies. The FDP sees compliance with the debt brake as a moral obligation to avoid burdening future generations with an unsustainable mountain of debt. The AfD also clearly supports maintaining it, arguing that Germany does not have a revenue problem, but rather a spending problem.

On the other hand, a broad alliance of reform advocates is forming. While the SPD adheres to the debt brake in principle, it wants to reform it to create more scope for urgently needed investments. Finance Minister Lars Klingbeil (SPD) complained that the country had been "ruined by austerity measures" in many areas and defended the planned high level of new debt as a necessary measure to modernize the dilapidated infrastructure and strengthen defense capabilities. The Greens also demand more scope for investment and want to finance this by reducing climate- and environmentally harmful subsidies and by implementing more efficient administration. The Left Party and the Sahra Wagenknecht (BSW) coalition are going even further. The Left Party estimates the additional investment need for the next decade at around 600 billion euros and wants to suspend the debt brake for investments. The BSW proposes a targeted reform in which investments in key areas such as infrastructure, schools, and housing would be exempt from the debt brake.

This dispute is more than a technical debate about budget rules. It is an expression of a fundamental divisiveness over the role of the state. The position of the CDU/CSU and FDP is deeply rooted in the ordoliberal tradition, which assigns the state the primary task of guaranteeing a stable regulatory framework for the market economy, while largely staying out of active economic activity. Debt is seen as a burden on private actors and future generations. This contrasts with a more social-democratic-Keynesian perspective, which sees the state as a central actor in solving major collective problems such as climate change, the infrastructure crisis, or social inequality. From this perspective, government investments are not mere expenditures, but necessary advance payments for future prosperity and social cohesion.

The intensity of this conflict was dramatically exacerbated by the Federal Constitutional Court's ruling declaring the repurposing of coronavirus loans for climate protection unconstitutional. It exposed the inherent contradictions of current policy: the political will for massive investments clashes with the constitutional requirement to limit debt. The need to amend the Basic Law for the rearmament of the Bundeswehr and to create a special fund outside the debt brake underscores that the existing fiscal framework is viewed as inadequate to address the new geopolitical realities. The debt brake has thus become a legal battlefield on which the struggle for the future role and financial capacity of the German state in the 21st century is being waged.

The demographic tsunami: The German pension system on the verge of collapse

Alongside fiscal concerns, demographic change poses arguably the greatest and most relentless structural challenge facing Germany. At the heart of this development is the statutory pension insurance system, whose pay-as-you-go system is based on a generational contract whose mathematical foundation is eroding. Fewer and fewer contributors of working age must finance the pensions of a steadily growing number of retirees, whose life expectancy is also continuously increasing.

The consequences of this imbalance have been known for decades and documented by numerous forecasts. The so-called old-age dependency ratio – the ratio of people of retirement age to people of working age – is rising inexorably. While in 1990 there were 24 retirees for every 100 people of working age, today there are already 37. This trend will accelerate dramatically in the coming years as the baby boomers enter retirement.

Projections by the German Council of Economic Experts and the German Pension Insurance paint a bleak picture for the future unless the system is fundamentally reformed. According to current calculations, the pension insurance contribution rate will have to rise from the current 18.6% to 24.0% by 2060. At the same time, the pension level, i.e., the ratio of the standard pension to average income, will decline from approximately 48% today to just 42.0% in 2060. This means that future generations of workers will have to pay significantly higher contributions for a comparatively significantly lower pension.

Past reforms, such as the gradual increase in the retirement age to 67 or the introduction of the "sustainability factor" into the pension adjustment formula, have merely slowed this process, not halted it. They were necessary but insufficient steps. The current political debate revolves around further, often marginal, adjustments such as "generational capital," a funded fund intended to support pension financing, but whose volume is far from sufficient given the scale of the problem.

The often-invoked narrative of a "generational conflict," pitting the young against the old, is a misleading oversimplification. The core problem is not the younger generation's unwillingness to support the older generation, but the failure of successive political leaderships to implement painful but mathematically inevitable reforms in a timely manner. Demographic trends are no surprise; they were predicted as early as the 1960s. However, instead of creating long-term, sustainable solutions that burden all generations – for example, by raising the retirement age even more significantly, by broadening the base of contributors (as in Austria, where self-employed individuals and civil servants also contribute), or by engaging in an honest debate about future benefit levels – politicians have limited themselves to short-term corrections and complex dampening factors that are difficult for citizens to understand. The looming collapse of the pension system is therefore less an inevitable demographic consequence than the foreseeable result of decades of political hesitation and the lack of courage to impose short-term demands on the electorate in exchange for long-term stability.

Growth engine stutters: The structural causes of German stagnation

The German economy, long the undisputed growth engine of Europe, has been in a phase of stagnation for several years. The German Federal Government's 2025 Annual Economic Report clearly states that this weakness is not merely cyclical, but has deep structural causes. The growth model that has brought Germany prosperity and stability for decades is reaching its limits. The institutions and structures that once defined the country's strength are increasingly proving to be obstacles in a rapidly changing world.

A key problem is the massive backlog of public investment. Investments in critical infrastructure have been neglected for years. The result is dilapidated bridges and roads, an unreliable rail network, and a digital infrastructure that lags behind by international standards. These deficits not only impair the quality of life of citizens but also worsen the conditions for businesses.

Added to this is overwhelming bureaucracy. Complex and lengthy planning and approval procedures, a flood of reporting obligations, and increasing regulatory density, often driven by EU requirements, are paralyzing private investment activity and entrepreneurial initiative. Startups and established companies alike are faced with hurdles that slow down innovation and make it difficult to adapt to new market conditions.

The German Mittelstand (SMEs), the backbone of the economy, is feeling this pressure particularly hard. These often family-run, highly specialized companies, which account for over 99% of all companies in Germany and provide almost 60% of jobs, are the heart of the German economy. Their strengths have traditionally been their long-term orientation, high product quality, and deep regional roots. But these very strengths are now becoming challenges. Their often rural location makes them dependent on a functioning public infrastructure, which is now crumbling. Their concentration on niches in the manufacturing industry makes them vulnerable to global shocks such as energy price crises and supply chain disruptions. In addition, many SMEs are struggling with digital transformation, skilled labor shortages, and business succession planning. A telling anecdote from Argentina reports that, compared to competitors from China or Israel, German business partners often take days or weeks to respond to inquiries – a possible sign of dangerous complacency.

Ultimately, the German export model itself is becoming its Achilles heel. The country's heavy dependence on global markets, which was a blessing in an era of globalization, is becoming a significant vulnerability in a time of geopolitical fragmentation, growing protectionism, and intensified competition, particularly from China. The traditional German recipe for success – producing high-quality industrial products for the global market – is no longer functioning smoothly.

The structures of the social market economy, with its social partnership based on consensus and stability, designed for incremental improvements, are struggling to cope with the disruptive changes required by digitalization, decarbonization, and deglobalization. The German economic engine was perfectly engineered for the world of the 20th century. The current stagnation is an unmistakable signal that this engine requires not just maintenance, but a fundamental overhaul to survive in the 21st century.

Germany's structural challenges: An overview

Germany's structural challenges can be summarized in several areas. In public finances, rising absolute debt and a lack of transparency are evident, leading to debates about the debt brake and the increased use of special funds. This reflects a normalization of crisis financing and the circumvention of regular budget processes, which in the long term jeopardizes fiscal capacity and budgetary discipline. In the area of social security, particularly pensions, the focus is on the pay-as-you-go system, which is unaffordable due to demographic changes. The declining pension level and simultaneously rising contributions reflect political hesitancy to implement necessary but unpopular reforms. Otherwise, the collapse of the intergenerational contract, old-age poverty, and an overburdening of contributors threaten. With regard to economic growth, persistent stagnation and declining competitiveness are evident, characterized by an investment backlog, excessive bureaucracy, and a weakening middle class. The cause lies in the structural rigidity of the economic model and the neglect of important location factors, which in the long term could lead to a loss of prosperity, deindustrialization, and a decline in Germany's international importance. Finally, the political culture is characterized by a reform backlog and growing polarization, with tough negotiations and blockades hindering key projects. The consensus-oriented system, designed for stability rather than disruptive change, is failing to adapt to new global realities, resulting in a loss of trust.

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Argentina – Radical cure after the permanent collapse

The election of Javier Milei as president of Argentina and the radical shock therapy he initiated cannot be understood without their historical context. His policies are not a random political whim, but an extreme, almost desperate reaction to a century of economic decline and institutional failure that has brought the country to the brink of the abyss.

A century of crises: From wealth to hyperinflation

Argentina's economic history of the 20th century is a tragedy of squandered potential. At the beginning of the century, thanks to its fertile soils and agricultural exports, the country was among the richest nations in the world, with a per capita income close to that of the United States. But this prosperity was systematically undermined.

A decisive turning point was the rise of Peronism in the 1940s. The import substitution policy introduced by Juan Domingo Perón aimed to build a domestic industry by isolating it from the global market through high tariffs and subsidies. This led to the emergence of an inefficient, uncompetitive industry and a bloated state apparatus. To finance the enormous government spending and social programs, the banking system was placed under state control and the printing presses were turned on – the beginning of a vicious cycle of budget deficits, monetary expansion, and inflation that continues to characterize the country today.

The following decades were marked by a calamitous interplay between short-lived, populist democracies and brutal military dictatorships. Each regime left behind an ever-greater mountain of debt and even higher inflation. Between 1980 and 2019, the average annual inflation rate was a staggering 215.4%. Economic crises, sovereign defaults – nine in total in recent history – and the associated loss of savings and real wages became the norm in the lives of Argentinians.

The culmination and, at the same time, most traumatic moment of this development was the national bankruptcy and economic collapse of 2001 and 2002. After a period of apparent stability in the 1990s, purchased through a fixed 1:1 peg of the peso to the US dollar, the system imploded. The consequences were devastating: the poverty rate soared to over 57%, real wages collapsed, and an entire middle class lost its savings and social status overnight, leading to the emergence of the "nuevos pobres," the "new poor." This crisis destroyed the population's last vestiges of trust in the political class, the banks, and the currency. It created a breeding ground of despair and cynicism in which, decades later, the radical ideas of Javier Milei would find fertile ground.

The Milei Doctrine: Shock Therapy with the Chainsaw

When Javier Milei took office in December 2023, he inherited an economy in free fall: an annual inflation rate of over 211%, a deep recession, and a poverty rate of 45%. His response was not gradual reform, but rather economic shock therapy, which he himself described with the image of a chainsaw ("motosierra"). The stated goal: to end hyperinflation at all costs by radically eliminating its root cause – the chronic budget deficit financed by printing money –

The centerpiece of his strategy is a brutal fiscal adjustment program. Immediately after taking office, government spending was drastically cut: ministries were halved, tens of thousands of public sector jobs were eliminated, public infrastructure projects were halted, and subsidies for energy, transport, and food were massively reduced. The results of this drastic measure were impressive from a fiscal perspective: In his first full month in office, Argentina recorded a budget surplus for the first time in over a decade, a streak that continued in the following months.

In parallel with fiscal consolidation, monetary policy was reversed 180 degrees. The central bank stopped printing pesos to finance government spending – a fundamental break with the Peronist past. This was complemented by a massive devaluation of the official exchange rate to correct currency distortions. These measures led to a dramatic decline in the monthly inflation rate: from a shock peak of 25.5% in December 2023, it gradually fell to below 3% in spring 2025.

This macroeconomic shock is accompanied by a far-reaching deregulation and liberalization agenda, bundled in a comprehensive emergency decree (DNU) and an "omnibus law." These legislative packages, passed in a slimmed-down form despite Milei's lack of a majority in Congress, aim to fundamentally restructure the Argentine economy. They include the liberalization of rental law, labor market flexibilization, the privatization of state-owned enterprises, and the creation of incentives for large-scale investments, particularly in the raw materials and energy sectors. Milei's doctrine is an uncompromising attempt to replace Argentina's state-centered, protectionist model with a libertarian minimal state in which the free market is the driving force.

The price of recovery: social disruption and political risks

The Milei government's shock therapy is showing initial success in stabilizing macroeconomic indicators, but the price for this is a social catastrophe of enormous proportions. The brutal austerity measures and the initial spike in inflation following the currency devaluation have wiped out the population's purchasing power and led to a deep slump in economic activity. Argentina is in a severe recession, with consumption plummeting and industrial production declining sharply.

The social consequences are devastating. The poverty rate has exploded since Milei took office, at times significantly exceeding the 50% mark. The most vulnerable members of society are particularly affected: children and pensioners. According to a study by the University of Buenos Aires, the poverty rate among pensioners has more than doubled from 13.2% in the first half of 2023 to 30.8% in the same period of 2024. This means that almost one in three pensioners lives in poverty. The minimum pension of around €250 compares to an estimated monthly need of €950, forcing many elderly people to rely on soup kitchens. Reports of an increased number of people scavenging for food in garbage bins and overburdened social services paint a grim picture of the social reality.

This approach is a highly risky gamble on time. The government is betting that economic recovery will begin before the population's patience runs out. So far, support for Milei has remained astonishingly stable; his approval ratings are at levels his predecessors could only dream of. This is explained by the deep rejection of the old Peronist system, which they perceive as corrupt and failed. Many of his voters, especially young people and workers in the informal sector, do not see traditional power structures such as the powerful trade unions (CGT) as representing their interests, but rather as part of the privileged "caste" that Milei is fighting against.

Nevertheless, the political situation is fragile. Milei governs without his own majority in Congress and without a single governor at the provincial level. He relies on shifting, uncertain alliances to implement his reforms. The traditional power blocs, above all the Peronist movement and its affiliated unions, are forming a resistance, organizing mass protests and general strikes. The sustainability of Milei's project thus depends crucially on whether he succeeds in translating macroeconomic stabilization into tangible improvements in living conditions for the broad masses – and quickly. It's a ride on the razor's edge between economic necessity, social resilience, and the arithmetic of political power.

Argentina's shock therapy: A review after one year

After a year of shock therapy in Argentina, a clear assessment can be drawn. Before President Milei took office at the end of 2023, the country suffered from a chronic budget deficit, financed primarily by printing money. The government responded with radical cuts in government spending and the reduction of subsidies, leading to a persistent budget surplus. However, there is a risk of social unrest due to these austerity measures, and the sustainability of the cuts remains questionable. In terms of monetary policy, at the time, hyperinflation of 211% annually and massive currency distortions prevailed. The government stopped monetary financing of the state and allowed a sharp devaluation, which reduced monthly inflation to below 3% and stabilized the exchange rate. Nevertheless, there is a risk that inflation will rise again with an economic recovery, especially if foreign exchange controls are not maintained. Before Milei, the real economy was characterized by stagnation and recession, and a heavily protected and inefficient industry crippled growth. Deregulation, a halt to public investment, and the liberalization of markets plunged the country into a deep recession with a sharp decline in consumption and production. Due to the lack of private investment, there are strong indications of an "L-shaped" rather than a rapid "V-shaped" recovery. Social problems intensified, as poverty was already at around 45% and purchasing power was eroding. Cuts in social benefits and losses in real wages led to an explosion in the poverty rate to over 50%, especially among pensioners. Social patience has run out, and hunger and poverty are increasing. Politically, there was little trust in the established "caste." The government pursued a confrontational course with unions and traditional political forces. Despite surprisingly stable approval ratings, Milei lacks a majority in Congress, which favors the blocking of further reforms and could exacerbate conflicts with social movements. Overall, it is clear that the radical shock therapy, while bringing initial economic successes, is associated with considerable social and political risks.

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Confrontation of models – What Germany can learn from Argentina

A direct comparison between Germany's creeping crisis and Argentina's radical shock therapy reveals two fundamentally different approaches to tackling national challenges. A comparison of the underlying economic and social models, as well as the political cultures, shows why Argentina's path cannot serve as a model for Germany, but nevertheless provides valuable, albeit uncomfortable, food for thought.

Social Market Economy versus Libertarian Minimal State: A System Comparison

At its core, two diametrically opposed philosophies regarding the role of the state and the organization of the economy and society clash. The German model of the social market economy, as it developed after World War II, is based on the idea of combining market freedom with the principle of social equality. The state actively intervenes in economic activity to mitigate social injustices and protect the weaker. Key elements include strong protection against dismissal, labor protection laws, antitrust prohibitions, and a comprehensive social security system.

A central pillar of this model is social partnership, the institutionalized cooperation between employers' associations and trade unions. This system of "collective bargaining autonomy," constitutionally enshrined in Article 9 of the Basic Law, leaves the regulation of wages and working conditions to the collective bargaining partners and aims to channel conflicts and create stable, predictable conditions. It is a system based on consensus, cooperation, and the pacification of class conflicts.

Argentina's burgeoning libertarian model under Javier Milei represents the exact opposite. Here, the state is seen not as a social arbiter, but as the root cause of all problems – as a corrupt, inefficient apparatus that stifles private initiative. Milei's goal is a minimal state limited to security and justice. His reforms are a frontal assault on the established corporatist structures. The powerful unions, historically associated with Peronism, such as the CGT, are viewed not as social partners, but as part of the "caste" to be fought. While the German system aims to tame and manage capitalism through social partnership, Milei seeks to unleash it by dismantling precisely these established power structures. The contrast could hardly be greater: on the one hand, institutionalized cooperation to ensure social peace, on the other, radical confrontation to implement a market-liberal revolution.

The inertia of success: Is Germany's stability a burden?

Perhaps the most profound and provocative insight from this comparison lies in the paradoxical role of stability and trust. Germany's decades of success and the resulting high stability of its institutions appear to have fostered a culture of risk aversion, complacency, and the postponement of reform. Argentina's history of total failure, on the other hand, created the political space for radical, decisive action.

This phenomenon can be described as the "trust paradox." Despite recent declines, Germany is still characterized by a relatively high level of citizen trust in key institutions such as the judiciary, the police, and public administration compared to other countries. This institutional trust is a valuable asset and an essential prerequisite for the functioning of a democracy. It increases acceptance of political decisions and compliance with laws. Paradoxically, however, this high level of trust can also inhibit reforms. When citizens fundamentally assume that the system works, the perceived urgency for fundamental change decreases. They prefer incremental adjustments and shy away from the risk of radical disruption, even when structural problems such as those in pension or fiscal policy are clearly piling up. The political culture is optimized for stability and consensus, not for rapid, disruptive transformation.

In Argentina, the starting point was exactly the opposite. Decades of hyperinflation, corruption, and broken promises had led to a complete collapse of trust in the entire political class and its institutions. This distrust was so absolute that a political outsider like Milei, whose entire message was based on the destruction of the old "caste," was able to gain a majority. The population's despair and loss of trust were the necessary conditions for their willingness to take the extreme risk of shock therapy – a gamble that a society with functioning institutional trust like Germany's would never take. Thus, trust in Germany acts as a stabilizing flywheel, but one that can turn into inertia. In Argentina, the total loss of trust acted like an explosive charge, clearing the way for radical change.

Lessons from Radicalism: Impulses for the German Reform Debate

It must be made unequivocally clear: Argentina is no model for Germany. Its path was born of sheer desperation and paved with immeasurable social suffering. Such a course would be neither feasible nor desirable in a stable democracy with a functioning welfare state. The lessons Germany can draw are therefore not concrete, but abstract. They lie not in imitation, but in reflection on its own situation, which is sharpened by looking at the extreme.

First, the cost of procrastination. Argentina tragically demonstrates the final stage of a process in which structural problems such as chronic budget deficits and a creeping devaluation of the currency are ignored for decades or covered up with short-term stopgap measures. The ultimately enforced correction is exponentially more painful than early, gradual reforms would have been. The lesson for Germany is clear: The slowly accumulating costs of demographic change and the investment backlog will not disappear on their own. They will accumulate into an acute crisis. Acting decisively while the country can still operate from a position of strength is far less costly than being forced into drastic measures later under the pressure of circumstances.

Second, the primacy of fiscal reason. Milei's core message and most successful policy to date was the radical halt to debt-financed government spending through the printing press. This simple, brutal discipline was the indispensable prerequisite for taming hyperinflation. Even though Germany is far from such conditions, the principle remains valid: a credible and long-term sustainable fiscal policy is the foundation for macroeconomic stability and confidence in the currency. The increasing normalization of shadow budgets in the form of special funds that circumvent the debt brake is a dangerous path that undermines this credibility.

Third, the need for an honest "review of the state's finances." While Milei's chainsaw approach was crude, it forced a fundamental reassessment of every single government expenditure, every subsidy, and every program. Nothing was sacred anymore. Germany needs its own, albeit more methodical and socially cushioned, version of it. A comprehensive, ideology-free review of all subsidies – especially those harmful to the climate and the environment – all regulations, and all bureaucratic processes is long overdue. Only in this way can inefficiencies be eliminated and scarce resources freed up for forward-looking investments in education, infrastructure, and technology.

Fourth, the limits of the state and the power of the private sector. Milei's libertarian ideology is extreme, but it touches on a sore spot: an overregulated, bloated, and inert state can stifle private dynamism and entrepreneurial initiative. The lesson for Germany is to readjust the balance between state regulation and private freedom. It's about shaping the framework to encourage private investment and innovation, rather than relying primarily on state-directed programs. This includes radically reducing bureaucracy, faster approval procedures, and fostering a culture of entrepreneurship.

A plea for bold but moderate reforms

The comparison between Germany and Argentina is a confrontation of two worlds. Argentina's radical break with its own past is a dramatic warning signal, not a model to be emulated. The social cost of this shock therapy is unacceptable for a stable society like Germany. Nevertheless, it would be fatal to shrug off the Argentine development as an exotic drama. For the radical nature of Argentina's response to total collapse provides valuable impetus for Germany's approach to its creeping crisis.

Germany's greatest challenge is to find a third way: a path that mustered the determination and courage to undertake the far-reaching reforms that Argentina was forced into by the collapse, but implemented within the proven and successful framework of the social market economy and social partnership. It is about overcoming the inertia of success without jeopardizing the stability that made this success possible.

This means viewing the debt brake not as an untouchable dogma, but as an intelligent instrument that ensures stability while not blocking necessary future investments. It means no longer postponing pension reform, but forging an honest, intergenerational compromise based on realistic assumptions. And it means not viewing the state as a panacea, but empowering it to act as a lean, efficient, and unbureaucratic partner for a dynamic private sector.

The Argentine crisis demonstrates where decades of political failure can lead. German stagnation demonstrates how quickly a successful model can lose relevance if the will to constantly adapt is lacking. The ultimate lesson is therefore a call to political leadership and society in Germany: It is important to use the remaining prosperity and stability to reform from a position of strength. Because those who wait too long will ultimately be left with only the painful and radical options that are currently on the agenda in Buenos Aires.

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