Berlin The chairman of the Advisory Council for Consumer Questions in the Federal Ministry for Consumer Protection, Peter Kenning, raises the alarm in view of the cost increases for consumers.
“The signs of an increase in consumer over-indebtedness are clear,” the Düsseldorf economist told the Handelsblatt. Planned larger purchases would be postponed, existing reserves used up, and one’s own account would be overdrawn. “When those opportunities are exhausted, you borrow money from friends or relatives,” Kenning said.
The economist reacted to the sharp rise in inflation. In May, inflation continued to rise at a record level: consumer prices were 7.9 percent higher than in the same month last year, as the Federal Statistical Office announced on Monday. This means that inflation in Germany has remained above the seven percent mark for the third month in a row.
There have never been such price increases in reunified Germany. In the old federal states you have to go back to the winter of 1973/1974 to find similarly high values. At that time, mineral oil prices had risen sharply as a result of the first oil crisis.
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Consumer advocates were also alarmed. “The rising prices have triggered a consumer crisis,” said the interim head of the Federal Association of Consumers (VZBV), Jutta Gurkmann, the Handelsblatt. “When heating, electricity and food become more and more expensive, this puts enormous pressure on people with little money in particular.”
Expert does not expect a sudden increase in personal bankruptcies
According to insolvency expert Patrik-Ludwig Hantzsch, the situation could get worse. “Many cost drivers, such as utility bills, have not even reached consumers yet,” said the head of Creditreform’s economic research. At the same time, there is currently no sign of a “significant increase” in consumer over-indebtedness. “Even in this situation, we will not see a sudden increase in personal bankruptcies.”
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For months, sharply increased energy prices have been driving inflation in Germany and in the euro area. This trend was exacerbated by the Russian attack on Ukraine. In addition, as during the corona pandemic, the industry is struggling with the fact that supply chains are not working smoothly.
According to calculations by statisticians, consumers in Germany had to pay 38.3 percent more for energy in May than a year ago, and groceries rose by 11.1 percent.
The sharply rising prices put a strain on the purchasing power of Germans. Although wages rose in the first quarter by a strong 4.0 percent compared to the same period last year. However, since prices increased by 5.8 percent during this period, real wages fell by 1.8 percent.
The Institute for Macroeconomics and Business Cycle Research (IMK), which is close to the trade unions, assumes that the real wage losses will continue at least until the end of the year. “However, even then, not all real wage losses resulting from the high inflation in 2022 should be made up immediately,” said the scientific IMK director Sebastian Dullien of the Reuters news agency.
Call for additional help for low earners
Politicians are helping to stabilize the purchasing power of private households with targeted relief packages. But it is questionable whether the aid will be sufficient to cushion the burden. The deputy head of the Union parliamentary group, Steffen Bilger (CDU), called on the federal government to act. “Germany urgently needs an overall concept that relieves the burden on the majority of our society and thus prevents private bankruptcies,” said Bilger.
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Such a concept also includes adjusting the income tax rate to price developments, paying the energy lump sum to students, pensioners and young families on parental leave, and reducing the electricity tax. “That’s the only way people can live longer.”
Government adviser Kenning is suggesting a credit moratorium, similar to that in the first corona lockdown, when rent payments and loan repayments could be temporarily suspended. “Should the measures taken not be enough and should the number of personal bankruptcies increase significantly, one could consider this instrument to give people some breathing space,” said Kenning. “In order to be able to react in time, it would be advisable to keep an eye on the development of the power cuts.”
Consumer advocate Gurkmann, on the other hand, does not consider a credit moratorium to be expedient in the current situation. “Rising prices require different and more comprehensive solutions,” she said. These included a higher heating cost subsidy, the temporary suspension of electricity and gas cuts and the rapid introduction of climate money.
Gurkmann also advocated the abolition of VAT on fruit, vegetables and legumes as well as “higher nutrition-related standard rates” in basic security and unemployment benefit II.
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Insolvency expert Hantzsch advised politicians to focus on cases of hardship and not to protect all consumers from cost increases. “A number of well-intentioned individual measures such as the nine-euro ticket, fuel vouchers or short-term moratoria cost the state enormous sums, but will not be sustainable,” said Hantzsch. It would therefore be better to help the weakest in the short term, but “avoid help from the watering can for everyone”.
Economist Kenning brings additional help for the areas of housing, mobility and nutrition into play. There, price increases would have a “relatively strong effect on the financial situation of consumers,” he said. However, the costs do not hit everyone equally.
The energy price flat rate of 300 euros that has already been decided could save one consumer from an existential emergency, for the other it was “nice to have”, explained Kenning. He sees a need for action, especially with regard to low-income households. “If the measures taken so far are not sufficient, this group could be helped at short notice with another one-off payment.”
More: Analyst forecasts exceeded: inflation in Germany rises to 7.9 percent