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How Germany wants to help small businesses stay afloat

The ruling Social Democrats are concerned that rising energy costs could spur a wave of bankruptcies, particularly among small and medium-sized firms. That’s why they want a temporary suspension of insolvency requirements.

How Germany wants to help small businesses stay afloat
An application to begin bankruptcy or insolvency proceedings in Germany. picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

German Chancellor Olaf Scholz’s party, the largest in the Bundestag, wants to temporarily suspend the requirement for businesses to file for insolvency, as upcoming winter and rising energy costs wreak havoc on both household and business budgets.

“It seems to me that temporary changes in insolvency law are urgently needed for us to get through the crisis together and preserve jobs,” SPD parliamentary group leader Dirk Wiese told the Rheinische Post in Düsseldorf.

Wiese says some businesses in Germany will already be feeling the crunch of rising costs, while still not being able to access any of the federal government’s relief programs.

READ ALSO: What’s in Germany’s support package for rising energy bills?

The German Bundestag has passed around €100 billion in inflation relief packages in total, with the last one totalling €65 million. However, much of the money – including the promised one-off €300 energy payment or the €300 to pensioners – still hasn’t actually been paid out yet.

The SPD says it’s not fair for companies to have to declare insolvency now due to biting costs if government aid later could eventually help them stay afloat. That matters because some relief measures are not available to businesses that have already declared bankruptcy.

“We have to take responsibility here and give these companies a helping hand,” says Wiese.

A recent survey found that about 83 percent of Germans expect there to be job losses this winter due to rising costs and failing businesses.

The SPD parliamentary group has requested that Energy and Economy Minister Robert Habeck, Scholz’s Green Vice-Chancellor, put a proposed law together for suspending bankruptcy filings. They say they’re still waiting for a response from Habeck’s office.

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MONEY

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.

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