The demographic decline can already be felt in eastern Germany. In addition to lower birth rates, jobseekers who can't find work there have been taking off and trying their luck elsewhere.

Some five million people lived in the state of Saxony just after German reunification in 1990. Today, there are only 4.3 million people,and in 2020 there are expected to be only 3.7 million, which represents a total population decline of 25 percent.

Balancing quality of life

Small towns and rural areas are particularly affected by the exodus, which Wolfgang Tiefensee, minister for transportation, building and urban development, sees as a constitutional challenge.

"The Basic Law stipulates that we have to ensure that quality of life in rural areas is just as good as in small towns, mid-sized cities or big cities," said Tiefensee. "That doesn't mean, though, that in the future we are going to maintain all kinds of institutions everywhere."

Fewer residents mean less tax revenue for cities and towns. Therefore, the infrastructure becomes shaky when the number of residents drops sharply. Funding cuts must be made to public buildings, schools, swimming pools, libraries, streets, water, electricity and even sewage.

Taking out more loans is not the solution to the problem, said Georg Milbradt, premier of the eastern German state of Saxony.

"Instead, we have to pay back our existing loans in proportion to the decline in residents so that at least the per capita financial burden remains the same. But we're miles away from that," Milbradt said.

Cutbacks and compromises for rural residences

In light of the hefty financial challenges, Milbradt said it wouldn't be possible to maintain identical standards of living across the country. Residents of rural areas will have to settle for city halls on wheels, hailed busses, shared taxis and local nurses instead of doctors, he said.

The state government in Saxony has already begun demolishing empty apartment buildings because there is simply no need for them. The younger generation -- those starting families and looking for living space -- is too small to support the existing real estate market.

By 2015, a total of 250,000 superfluous apartments are to be removed from the market, said Milbradt.

"If we didn't do anything about it, supply and demand would be thrown out of balance, which would ruin a large number of private and commercial apartment owners," he said.

Restructuring in East and West

The federal government subsidized removal of the apartment buildings as part of a special city reconstruction program put in place for eastern Germany. Some 2.5 billion euros ($3.19 billion) have been set aside until 2009 for the project.

A similar restructuring program is in place for western Germany, to which the federal government has allotted 86 million euros until 2009. An additional 110 million euros have been made available for the Germany-wide "Social City" program, which emphasizes senior and cross-generational residences.

Trend shifting to older specialists

"Since we're all getting older and becoming fewer, we have to make better use of our resources. Young people have been the bearers of innovation in the economic developments we've had so far. But when there aren't as many young people, we'll have to rely on the seniors," said Milbradt.

For that to happen, however, the current trend will have to be reversed. These days, more and more people leave leadership positions at an earlier age, and many companies hardly have any employees over 50.

The penchant toward young employees will inevitably change in the next 15 years or so. When the pool of younger specialists becomes small enough, companies won't have a choice anymore.