Germany to cut support services for long-term jobseekers

Germany plans to slash funding for services that help the unemployed get back into the world of work.

Düsseldorf jobcentre
The hallway of the jobcentre in Düsseldorf. Photo: picture alliance/dpa | Oliver Berg

In the draft budget passed by the cabinet last week, the government earmarked €163 billion for the Ministry for Labour in total – the largest allocation of spending in any ministry.

However, though the overall amount spent in this department was €2 billion higher than last year, the so-called “benefits for integration into employment” will be cut from €4.8 billion to €4.2 billion.

The benefits for integration into employment are designed to ease to the transition from long-term unemployment into full-time work. The budget is used to finance wage subsidies for employers who hire the long-term unemployed, in addition to services like addiction counselling and debt advice.

READ ALSO: EXPLAINED: Germany’s plan to ditch sanctions for the unemployed

Having lifted caps on borrowing during the Covid crisis, Finance Minister Christian Lindner (FDP) is keen to reinstate them next year under a policy known as the ‘debt brake’.

This year, Germany has taken on around €140 billion in new debt to assist with the fallout from the Ukraine war and energy crisis, but Lindner is eyeing a more fiscally conservative approach in 2023. 

Both the opposition CDU/CSU and the Left Party responded furiously to the cuts, describing the some €600 million in savings from the jobseekers’ budget as “social austerity”. 

Jessica Tatti, the Left’s social policy spokesperson, told Spiegel that the changes would make it more difficult for the long-term unemployed to integrate into society and to participate in society.

“It is not surprising that the Federal Minister of Finance, Christian Lindner, is making cuts to long-term unemployment benefits in order to comply with the debt brake,” Tatti said. “If the SPD and the Greens go along with this, however, they’ll lose the last vestige of social credibility they have.” 

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Are the EC Card’s days numbered in Germany?

Maestro-function EC cards will no longer be issued as of July 2023. That may leave many people with German cards without the option to use the ubiquitous “EC Karte” abroad. Here's what you need to know.

Are the EC Card’s days numbered in Germany?

In a country that often lags behind much of the rest of the world digitally, cash is still king in many places. From restaurants to bars, cafes, and some smaller shops – options to pay by card are often limited. If a place does take card, it’s often the debit EC card, rather than a credit card or plastic from abroad.

That could soon see a shakeup.

Around 100 million EC cards are currently in use in Germany – more than the number of residents. These cards use two payment services: the Maestro service, which Mastercard provides, and the Girocard service which is independent. Maestro allows the holder to pay with an EC card when abroad, whether at a beach bar in Spain or a museum in Italy.

At home in Germany, Girocard processes EC card transactions.

But the EC card’s popularity here doesn’t translate elsewhere. German cards account for about half of all worldwide Maestro transactions, with the remaining half split absolutely everywhere else in tiny amounts. As such, it’s become difficult and expensive for Mastercard to maintain the old Maestro system that so many people in Germany love to use.

As of 2023, Mastercard will no longer issue Maestro cards, although people can still use ones issued before then until they expire. Without an alternative, that would leave some German debit card holders unable to pay using their new cards abroad.

Rumour has it that a similar Visa service – Vpay – is also on the way out soon.

That could see many cardholders ditch their old EC cards for Mastercard and Visa’s debit services — but around 250,000 businesses in Germany still only take payments made through the Girocard service — which isn’t a part of Visa or Mastercard. A big reason is that retailers pay lower fees to use Girocard.

What are the alternatives to EC Cards?

Where might that leave cardholders in Germany? It might put more pressure on retailers to accept services other than Girocard, which could incur fees that retailers will simply pass on to buyers.

It might leave some people carrying multiple cards, with a debit card they would only ever be able to use at home and not abroad. Or, it might mean carrying more cash just in case people come into an establishment that only takes cash and Girocard.

Some German banks have already moved ahead to offer customers integrated cards.

DKB, an popular online bank in Germany, sees Girocard as an outdated model that can’t be developed much further—and one that’s hard to use for online shopping. Since January, it has only issued customers with a Visa Debit card, but has left them the option to also have a Girocard. This will no longer be free though, costing customers an extra €1 a month.

A customer pays with EC card in a local shop

A customer pays with EC card in a local shop. Many businesses still only take EC card or cash payment in Germany. Photo: picture alliance/dpa | Rolf Vennenbernd

READ ALSO: Why Germans are finally choosing cards over cash

Other banks, like ING, use a ‘co-badge’ system that pays for both the licenses to Girocard and either Visa or Mastercard. However, that leaves cardholders paying a higher fee.

Professor Jürgen Moormann of the Frankfurt School of Finance and Management told Frankfurter Allgemeine Zeitung (FAZ) that MasterCard and Visa are probably discontinuing the Maestro and Visa services for EC cards abroad to put more pressure on Girocard within Germany.

This makes it more likely that retailers will start offering more card-based payment options, such as credit and debit card, to keep things simple for customers.

“They clearly want to increase their market share in Germany,” Moormann says of Visa and Mastercard.

While it’s still too early to tell whether the EC card will be squeezed out, regular cardholders may be left carrying more than one card — or paying higher fees for integrated cards — for a while yet.

In Germany at least, the EC card will be around for some time to come — but its days may well be numbered.