Germany’s council of economic advisers yesterday warned that the introduction of a minimum wage and more generous pensions by a new government could put at risk economic gains achieved through far-reaching reform of the welfare state a decade ago.

The independent five-person council, also known as the “wise men” although it includes one woman, said future generations of Germans would bear the brunt of policies being proposed by Chancellor Angela Merkel’s conservatives and the Social Democrats (SPD) in coalition talks.

Among their planned measures are a nationwide minimum wage, a hike in pensions for mothers with children born before 1992 and steps that would make it more attractive for people to stop working before they reach the statutory retirement age of 67.

“Future challenges will be far more difficult to overcome if the Agenda 2010 reforms become diluted or reversed in some cases,” the council said, referring to labour and welfare state reforms unveiled by former German chancellor Gerhard Schroeder in 2003.

These reforms have been credited with boosting German competitiveness and shielding the economy from the worst of the global financial crisis and eurozone debt turmoil over the past half decade.

The council noted that the German government, which has promoted Agenda 2010 as a model for fellow eurozone states like Spain and France, needed to avoid diluting at home the very reforms it has trumpeted abroad.

“We need to restart the reform process, not undo it,” the economists said, pointing to a looming demographic challenge in Germany, which has one of the lowest birthrates in Europe.

The SPD has said it will refuse to form a “grand coalition” with Merkel’s conservatives unless a minimum wage of €8.50 per hour is introduced.

The centre-left party also wants to change rules they say allow companies to underpay and jettison workers on temporary contracts.

Christian Schulz at Berenberg Bank said: “Those are all steps backwards that erode the foundation on which Germany’s success of the moment is built.”

German industry is also worried about a government splurge. Media have reported that Berlin would need about €50 billion per year in added revenues if all of the plans proposed by the conservatives and SPD were to be implemented.