Parliament approved a measure Friday that gradually would pare Germans' retirement benefits, drawing protests of attacking a pillar of the welfare state.
With parliamentary elections 11 months away, reform of the national old-age pension system has become a key campaign issue. The opposition Social Democrats intend to scrap the cuts if they oust Chancellor Helmut Kohl at the polls.
Starting in 1999, the government plan will pare retirement benefits from 70 percent of a worker's average salary to 64 percent in 2030.
Labor Minister Norbert Bluem told Parliament the move was essential to save the system, strained by Germans' falling birth rates and longer life spans.
The legislation also calls for raising Germany's value-added sales tax by 1 percentage point to 16 percent to pump money into the retirement fund and to lower payroll deductions in 1999.
Retirement benefits now are funded by a 20.3 percent deduction from gross income, split equally between employee and employer.