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LIVING IN GERMANY

Living in Germany: Exploring locally, Bargeld and the NRW state election

In our weekend roundup for Germany we look at exploring the country this summer, the country's obsession with cash and some facts about North Rhine-Westphalia, which goes to the polls on Sunday.

Thomas Kutschaty, the Social Democrat's top candidate and leader of the North Rhine-Westphalia SPD, in Solingen for a TV event earlier this month.
Thomas Kutschaty, the Social Democrat's top candidate and leader of the North Rhine-Westphalia SPD, in Solingen for a TV event earlier this month. Photo: picture alliance/dpa | Oliver Berg

A chance to explore Germany 

Although we’re still in the pandemic, it feels like life in Germany is beginning to feel a bit more like it did before Covid hit us. With many restrictions easing, people have been really enjoying spring and looking forward to summer.  So it’s no surprise that many of you have been reading our stories about travel. Our articles on the €9 monthly ticket as well as train travel in Germany and beyond have been particularly popular. The public transport offer will also give many people the chance to explore closer to home. I know I am really looking forward to seeing more of Germany, whether it’s around the Brandenburg area near where I live, or going further afield (Heidelberg, I’m looking at you). I’d love to know if you want to use the €9 ticket or if you have any plans to explore Germany this summer. Please fill in this survey on the €9 ticket (it’s open until Monday) and get in touch with your opinions or other travel plans by emailing [email protected]. Thanks so much to those of you who’ve already been in touch.

Tweet of the week

The German love of cash or Bargeld in 2022 while the rest of the world goes contactless is indeed one of life’s greatest mysteries, as this tweet highlights. We’ll definitely be using our ‘ask a German’ series to try and find out more about this habit… 

Where is this? 

Pankstrasse U-Bahn
Photo: John MACDOUGALL / AFP

Berliners or those who’ve visited the capital may recognise this U-Bahn station which is situated in the north. The station is actually part of the Pankstrasse nuclear fallout shelter. Built in 1977 during the Cold War, this “multi-purpose” facility was intended to protect the citizens of West Berlin in case of a nuclear conflict. The bunker serves not only as an U-Bahn stop for commuters but also, in an emergency, could have sheltered 3,339 people for up to two weeks. For those interested, we’d recommend checking out a tour like those run by Berliner Untervelten E.V. Due to Vladimir Putin’s invasion of Ukraine, which has led to massive tension between Europe and Russia, the tours have become even more topical.

Did you know?

Since people in the state of North Rhine-Westphalia (NRW) or Nordrhein Westfalen are going to the polls this Sunday, we thought we’d look at some facts about this western state. This is Germany’s most populated state with about 17.9 million people. It’s also home to the most foreigners – around 2.5 million non-Germans live in NRW. With cities such as Cologne, Düsseldorf, Dortmund and Essen, the state is a culturally rich and diverse part of Germany. Many people don’t know that Bonn was the capital of the former West Germany all the way up to reunification, before Berlin took the title. Many federal buildings and institutions still have their base there. 

The state is led by Christian Democrat Hendrik Wüst who took over last year after Armin Laschet resigned as state premier following his unsuccessful federal election bid. The CDU is currently in a coalition with the Free Democrats. But it looks like change is on the horizon. The CDU and the Social Democrats are both polling at around 30 percent, with the CDU having a slight lead of two to four percentage points. Meanwhile, the FDP appears to have lost support. It’s going to be a tight race – and the Greens party – polling at around 17 percent – will likely be the kingmakers. Important topics for voters include the future of German industry, and how to secure jobs in the move to renewable energy. Many people see this election as a test for the federal government which is led by the SPD’s Olaf Scholz. 

Thanks for reading,

Rachel and Imogen @ The Local Germany 

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For members

MONEY

When will Germany’s rising cost of living slow down?

German consumer prices are increasing at record rates, leading to worries about a repeat of the so-called 'stagflation' of the 1970s. Why are experts worried - and when will inflation become more stable?

When will Germany's rising cost of living slow down?

What’s happening?

It’s something most of us are noticing almost every day – whether it’s increasing prices at the supermarket or at the gas station. 

After years of German inflation barely moving, Russia’s invasion of Ukraine has quickly pushed up German consumer prices.

In April, inflation hit a 40-year high rate of 7.4 percent, driven largely by higher energy costs. At the same time though, the government has slashed its 2022 growth forecast from 3.6 percent in January to just over 2 percent now. German economists say neither problem is likely to go away soon.

READ ALSO: Five ways Germany’s soaring inflation could affect your life

Has inflation ever increased like this before?

Experts are worried about a phenomenon that happened in the 1970s occurring again in Germany.

When high inflation and low growth go together, economists call it stagflation. A mix of the words “stagnation” and “inflation,” it describes the toxic mix of a slowing economy, possibly with more people losing their jobs – at the same time as the cost of living goes up.

Managing director of the Munich Ifo Institute, Clemens Fuest, told Bavarian broadcaster BR24: “With stagflation, goods become scarce. In this case, it is mainly energy that is in short supply, and this drives up prices. And the only way politicians can react to this is by giving targeted aid to those who are hardest hit, which is then borne by everyone together.”

A German receipt. Prices have been rising intensely in recent months.

A German supermarket receipt. Prices have been rising intensely in recent months. Photo: picture alliance/dpa | Karl-Josef Hildenbrand

In the early 1970s, tensions over the Yom Kippur War led to Middle East embargoes that pushed oil prices up abruptly, leading to stagflation.

At first, oil prices rose by 70 percent and then by 300 percent at its peak. Inflation rose to seven percent in Germany, which was heavily dependent on oil from the Middle East. Car-free Sundays and speed limits on German roads followed.

However, the economy stopped growing and within two years unemployment figures rose significantly. Companies passed on their increased costs to consumers, who in turn demanded higher wages, which the trade unions then implemented. This led to the a wage-price spiral.

In Germany, the Bundesbank reacted relatively quickly with a restrictive monetary policy – it raised interest rates. Inflation fell to 2.7 percent by 1978 before shooting up again in the early 1980s. Unemployment also peaked at 9.1 percent during this period. During the 1980s, the economy recovered and had growth rates of 2 to 3 percent.

In the USA, on the other hand, inflation rose to 20 percent and could only be brought down by a radically restrictive monetary policy of the central bank, with an increase in the base rate (the central bank’s interest rate) to 20 percent. The result, however, was a deep recession and high unemployment.

READ ALSO: How the cost of living crisis is changing German spending habits

It’s clear that stagflation is difficult to combat in terms of economic policy. In the US, this issue has been discussed recently. 

According to Harvard economics professor and former chief economist of the International Monetary Fund, Kenneth Rogoff, there’s a high risk of this happening due to a perfect storm of struggling economies, the war in Ukraine and worldwide supply issues.

German Finance Minister Christian Lindner has also been warning of stagflation. And the fear is real, according to Ifo head Clemens Fuest.

“In other economic crises, it’s usually the case that demand declines,” Fuest said. “So consumers are worried about the future, they buy less or people become unemployed.

“Then the state can intervene, monetary policy can increase demand. But that doesn’t work here. It is not a lack of demand, but a lack of supply. And that’s why the usual instruments of economic policy don’t work here, the state can’t do very much.”

How long will we see rocketing prices in Germany?

European governments are moving to wean themselves off Russian coal, gas, and oil as quickly as possible – in order to both sanction Russia for invading Ukraine and to stop financing Putin’s regime with European money. But there aren’t enough alternatives to Russia energy in Europe yet, and that’s pushing up energy prices.

At the same time, Ukraine is one of the world’s major producers of key agricultural products like grain and soybean oil. Russia’s blockade of the Port of Odessa has caused grain and soybean oil prices to spike, simply because Ukrainian ships carrying produce to world markets can’t leave safely.

READ ALSO: What to know about the latest price hikes in German supermarkets

Port of Odessa

A freight ship leaves the Port of Odessa. Photo: picture alliance/dpa/Ukrinform | –

Experts say consumer prices will become stable in Germany, but it depends on the world situation. 

Alexander Kriwoluzky, Head of Macroeconomics at the German Institute for Economic Research, told The Local that spiralling inflation is not the “new normal.”

“But I think we will see high prices this year and next,” he said.

Kriwoluzky says determining what effect these events will have on prices is less a matter of when these events end, but how. 

“It could well be that we find different ways of exporting grain out of Ukraine. If the European Union is successful at securing a safe energy supply that doesn’t rely on Russia, we could see prices come down a little then too,” he said.

Aside from the war, Kriwoluzky says China’s zero-Covid policy is also having a knock-on effect on German prices, as strict lockdowns have stalled deliveries and left European companies short of supplies.

Unless China eases its lockdown, possibly through greater vaccination, prices in Germany are likely to keep climbing for a while.

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