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ECONOMY

Nearly one in ten Germans cannot pay bills

The number of people in Germany who are heavily in debt rose dramatically this year, with nearly one in ten unable to pay their bills, according to figures released on Thursday.

Nearly one in ten Germans cannot pay bills
Photo: DPA

An additional 190,000 Germans fell into serious debt over the last year, according to new figures released by credit reference agency Creditreform, bringing the total number to 6.6 million – nearly one in ten adults.

A person is considered heavily in debt if they are unable to settle their payments within the foreseeable future. For an estimated 3.8 million of the most serious cases there is little chance of them raising themselves out of debt at all, the agency said.

On average, adults falling into this category have personal debts of around €33,000.

The most indebted place in Germany is Bremerhaven in the north east, where nearly one in five adults is heavily in the red. Wuppertal is also badly affected, as are many areas in the Ruhr region.

The increase in debt is apparent across all sectors of society, Creditreform said. Not just what they described as the “fun-orientated” under-30s, but those on a low income and also pensioners are increasingly affected.

Perhaps most shocking of all for the traditionally austere Germans is the “considerable” increase in middle-class debt.

Unlike elsewhere in Europe, very little serious private German debt can be ascribed to mortgages – just two percent of those heavily in debt are struggling due to having bought flats or houses, the report said.

Creditreform spokesman Michael Bretz said some companies, especially car manufacturers, make it too easy for customers to obtain credit – often with nothing to pay for the first three months.

Many consumers increasingly do not think twice about buying goods on hire purchase online, said the agency, especially high cost hi-tech products.

Meanwhile, the proportion of customers who end up defaulting on credit are usually the “best kept secrets” of most businesses, said Bretz.

DPA/The Local/jlb

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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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