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ECONOMY

German consumer prices hit 29-year high in November

German consumer prices hit a 29-year high in November, preliminary data showed Monday, as soaring energy costs and supply chain bottlenecks weigh on Europe's top economy.

Published: 29 November 2021 15:00 CET
Woman shopping in German supermarket
A customer walks through the aisles of a supermarket in Haßloch, Rhineland-Palatinate. Photo: picture alliance/dpa | Uwe Anspach

The annual inflation rate rose to 5.2 percent, accelerating for the fifth month in a row, with the surge partially driven by a 22-percent jump in energy prices, federal statistics agency Destatis said.

In October, prices had climbed by 4.5 percent year-on-year.

Germany’s central bank said earlier this month that German inflation could spike to just under six percent this year.

The higher cost of living is being experienced across the eurozone at the moment, putting pressure on the European Central Bank to tighten its ultra-loose monetary policy.

The ECB has so far insisted that the inflation surge in the 19-nation zone is transitory, and is wary of acting too soon and potentially stifling the pandemic recovery.

But Bundesbank chief Jens Weidmann, who is stepping down at the end of the year, has warned that the price hikes could last longer than expected.

Using the ECB’s preferred yardstick, the Harmonised Index of Consumer Prices (HICP), German inflation jumped to six percent in November — well above the bank’s two-percent target.

Higher demand after the easing of coronavirus restrictions has pushed up energy prices and led to shortages of key materials and labour around the world.

But Germany also suffers from the comparison effect with 2020, when the country introduced a temporary sales tax cut, as well as the introduction of CO2 pricing at the start of 2021, according to Destatis.

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Carsten Brzeski, economist at ING Diba bank, called November’s inflation figure “a shocker” but said the peak had yet to come.

“The December inflation number could be a new record high since German reunification,” he said. “One-off factors like base effects from higher energy prices and post-lockdown price mark-ups” will “gradually start to abate”, he added.

“However, it could take until the end of 2022 before headline inflation will drop below two percent, if not until 2023.”

Member comments

  1. There is no such thing as transitory inflation. Just inflation. Look at the producer prices index. Look at what’s coming down the pipeline . And then imagine that there won’t be any wage inflation to keep the whole process fuelled. Finally, imagine that inflation in the other Eurozone countries doesn’t let rip. The ECB won’t deal with it because its bankrupt members can’t afford the measures it needs to take . Make sure your pension is index-linked and buy a good wheelbarrow.

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BANKING

Card over cash? Why Germany is seeing a new payment preference

Cash has long been king in Germany, with many smaller retailers refusing to join the rest of the world in adopting contactless payment systems. But card-based payments are on the rise, as recent stats about Girocard use reveal.

Published: 13 February 2024 12:31 CET
Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year. 

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons. 

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26. 

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.”

With reporting by DPA

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