"Where Have All the Germans Gone?"

The demographic situation in nearly all Western European countries is a challenge. Social security in these countries—primarily the national healthcare and retirement systems—has always been based on the traditional demographic "pyramid." That pyramid has a smaller, older segment of the population at the top, with a large base of younger people at the bottom. According to the traditional model, the large base of younger, employed people contribute enough to the social security system to provide benefits for the older, retired generation.

However, the traditional demographic model is no longer reality in Western Europe. The crisis is considered greatest in Germany, where the current statistical birth rate of 1.4 children born per adult woman is well below the level of 2.2 considered needed to maintain a stable population. Of the approximately 82 million people living in Germany today, 75 million are German, the rest are foreigners. At the dawn of the new millennium, 25 percent of Germany's population was already over 60 years of age.

Demographic projections over the next 50 years have serious implications for the German economy and social security system. The number of Germans in the 20- to 40-year-old age bracket as a portion of the total population will continue to shrink. The current low birth rate is projected to continue well into the future with no turnaround in sight. As a result, the number of Germans will continue to decline to an estimated 55 million by the middle of this century. What a contrast to just 100 years ago, when Germany's population increased rapidly in the 40 years following the Franco-German war of 1871!

The consequences for Germany's economy and social systems are serious. In the early 1990s, the expenses for one pensioner were being financed by three wage-earners. By 2030 the ratio is projected to be one to one. Obviously, the current level of pension benefits cannot be maintained without major changes in the tax structure.

With fewer people, Germany's domestic market will continue to shrink, with the decline currently estimated to be 1 percent annually. Germany's dependence on exports to fuel its economy will continue to grow. Exports already account for one third of the country's gross national product. This, in turn, will make Germany's economy even more sensitive to currency exchange rates, trade issues and disputes, most notably between the European Union and the United States.

Could immigration provide a solution to Germany's declining population? The question continues to be debated in Germany among politicians and demographic experts. Some experts support relaxed immigration rules for foreigners with high educational levels or technical skills. Germany's conservative sister parties, however, have successfully used the immigration issue to gain votes among Germans convinced that there are already too many foreigners living in their country.

An interesting development related to the declining birth rate are concerns about Germany's future ability to fulfill its obligations within the NATO alliance. The size of the Bundeswehr, Germany's postwar army, is already about 25 percent less than it was during the height of the Cold War.

The population-related challenges Germany faces are common to nearly all countries in Western Europe today. They emphasize that the era of dominant nation-states in Europe could soon be over. In the foreseeable future no single country will be able to dominate the entire continent as France and Germany have done in the past.

Instead, Europe's future is now irrevocably linked to the success–or failure–of the European Union. That union, arising out of an historic agreement signed in Rome in 1957, will have an impact on the course of world events far beyond what any single European nation could have or even has had in the past. It will affect those who live well beyond its borders, even in the United States.