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ECONOMY

Polish influx boosts German border economy

Cheap rents and accessibility to both Poland and Germany has attracted a large influx of Poles in German border towns boosting the local economy.

Take the community of Löcknitz on the German-Polish border in the south of Mecklenburg-Western Pomerania. Once a no-go area because of high unemployment, high exodus and far-right radicals, the municipality is flourishing because of its new Polish inhabitants.

At 3,200 inhabitants, the community has grown by 300 over the past two years ago. More and more children are being born, possibly due to the €500 that the mayor promises each new citizen.

Poland’s 2004 accession to the EU, together with the end of border controls in 2007 with Germany have helped Löcknitz and other neighboring communities to flourish in what was once a dying region.

More and more Poles from the nearby town of Stettin, which has 400,000 inhabitants, are happy to move a couple of kilometers west to Germany. Now Löcknitz has 220 Polish citizens, there are 650 in Löcknitz-Penkun and around 1,000 wer in the Uecker-Randow area nearby.

Löcknitz’s Mayor Lothar Meistring is particularly pleased with his little community’s success story. According to Meistring, Poles are attracted by the “comparably cheap accommodation of higher standards.”

Since Polish citizens discovered the town, Löcknitz’s local real estate association has profited. The company’s director Maria-Theresia Odendall said they have practically no empty properties anymore. At the beginning of 2007, they had 58 Polish tenants, now that figure has doubled.

The new Polish inhabitants also appear to have an entrepreneurial streak. Odenhall tells of one tenant planning to build a Casino, an ice-skating rink as well as a car showroom for luxury cars.

Indeed, the regional boom is attracting companies such as Fleischmannschaft AG, which produces spices in the Polish region of Swidwin. They are now opening a production line in Löcknitz within a few weeks, creating six new jobs.

Marcin Baryliszyn, the company director admitted that another reason for moving production to Germany was so they can put “Made in Germany” on their products. “If we put ‘Made in Germany’ on our products, we will be able to reach foreign markets” more easily, he said.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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