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COST OF LIVING

German bakeries fight for survival as costs spiral

Faced with exploding energy and ingredient costs, German baker Tobias Exner has installed new energy-efficient ovens, shortened his opening hours and even considered baking at lower temperatures.

German bakeries fight for survival as costs spiral
Photo: Pixabay.

But “it just doesn’t taste the same without a good crust”, he said, adding that in any case such efforts could do little to counter the existential crisis he and other bakers are facing.

“If the conditions don’t change, then sooner or later a large share of bakeries in Germany will simply no longer exist,” Exner told AFP.

Bakeries in Germany have been among the businesses hardest hit by the economic fallout from Russia’s invasion of Ukraine.

The war has sent energy prices spiralling across Europe, but especially in Germany, which was previously heavily dependent on Russian gas.

“Bakeries all have ovens. Seventy percent of artisanal bakeries have gas ovens and gas prices are going through the roof,” said Friedemann Berg, managing director of the German Bakers’ Federation.

And two of the main ingredients used by bakers — flour and oil — are among those that have been affected by blockades at Ukrainian ports.

Exner’s business is relatively large with 220 staff and 36 branches in Berlin and the surrounding area, leaving it better placed than many to survive the crisis — but even he is struggling.

Wheat is now 2.5 times more expensive than before the crisis, he said, while the cost of a litre of oil has risen from around 82 cents to more than three euros ($2.91).

Dough in the dark

Energy bills for the business, meanwhile, have almost quadrupled compared with 2020.

“You can see that the calculations no longer work,” Exner said to the hum of machines at the company’s main production site in the town of Beelitz.

But Exner is reluctant to pass the cost increases on to his customers, who he simply believes “would not pay those kinds of prices”.

In central Berlin, the mood on the ground appears to confirm his fears.

“Even more? No way. It’s getting extortionate,” said unemployed Gloria Thomas, 56, when asked whether she would be prepared to pay more for her favourite loaf.

Many bakeries in Germany have already gone under as a result of recent cost increases, with others staging protests to demand urgent help from the government.

And there is more at stake than just bread rolls, according to Exner.

“These businesses are often the most important institution in the village — they are at once grocery store, social centre, post office, etc.”

In early September, around 800 German bakeries served customers in the dark for a day to draw attention to their plight.

Insolvency blunder

Germany’s centre-left government has announced relief measures worth almost 100 billion euros to tackle inflation, but small businesses have so far been largely excluded from the help.

Worse still, they were left feeling insulted by controversial comments by Economy Minister Robert Habeck earlier this month.

Asked on a TV panel show whether he thought Germany was heading for a wave of insolvencies, Habeck replied: “I can imagine that certain industries will simply stop producing for a while.”

The comments provoked anger from bakers in particular, who accused Habeck of having no understanding of their industry.

“Habeck is probably not a stupid person, but the question is, is he qualified for the job he has right now? And I would say no,” said Exner.

The Bakers’ Confederation is calling for “quick and unbureaucratic” financial aid.

Bakeries can shave off costs here and there but they “can only do so much”, according to Berg.

If government help does not arrive soon “the future looks bleak,” he said. “It could be that many businesses have to give up their operations or simply file for bankruptcy.”

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COST OF LIVING

German inflation edges up, as do real wages

German inflation edged up in May, data showed Wednesday, but analysts said it was due to one-off factors and would not deter the European Central Bank from starting to cut interest rates.

German inflation edges up, as do real wages

Consumer prices in Europe’s largest economy rose 2.4 percent from a year ago, according to preliminary data from federal statistics agency Destatis.

The figure, in line with analyst expectations, was up from 2.2 percent in April, and the first increase in six months.

At the same time, however, German real wages – which account for purchasing power – went up in the first quarter of 2024. With a 3.8 percent rise, that marks the highest jump in Germany over a single quarter since 2008.

Closely watched core inflation — which excludes volatile energy and food prices — was unchanged at three percent, despite expectations of a slight increase.

Observers said the uptick in the headline figure was caused mainly by the introduction of a flat-rate public transport ticket, costing just 49 euros ($53), in May 2023, which distorted the year on year comparison.

The rise is not expected to deter the central bank for the 20 countries that use the euro from beginning to cut rates at its meeting on June 6, with analysts predicting a quarter-point reduction.

Elmar Voelker from LBBW bank said the German data suggested inflation across the whole eurozone had ticked up in May.

But he added that this “will not change anything for the ECB’s decision next Thursday — (policymakers) had already anticipated that the inflation trend would be bumpier from now on,” and they will push ahead with starting to cut.

But they will be keenly watching inflation over the summer months to decide when to push ahead with further reductions, he added.

Beginning in mid-2022, the central bank aggressively hiked borrowing costs to tame inflation that soared following Russia’s invasion of Ukraine and amid pandemic-linked supply chain woes.

For the past few months, it has held its key deposit rate steady at a record high of four percent, as it awaits the right moment to start cutting.

In May’s German inflation figures, energy prices continued to fall, dropping 1.1 percent, Destatis said.

Services inflation rose to 3.9 percent, from 3.4 percent in April.

The German government forecasts inflation at 2.4 percent this year, following a 5.9-percent rate in 2023.

READ ALSO: The important money and tax changes in Germany in 2024

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