The decline is very clear: the number of over-indebted people in Munich fell by around 9,800 to 98,436 last year. The rate of over-indebted private individuals fell by 0.85 percentage points to 7.88 percent, the lowest level for more than 15 years. At first glance, this development may seem unusual, since the corona pandemic has had an impact on the labor market and – due to short-time work – also on the income of many people.
Philipp Ganzmüller, Managing Director of Creditreform Munich, gave a plausible explanation for the fact that the over-indebtedness rate has fallen when presenting the Debt Atlas Munich 2021: “The great uncertainty about the further development of the pandemic as well as feared or real income losses have many consumers with financial expenditure make us much more cautious.”
In addition, the lockdowns would have slowed consumption, there were “simply fewer opportunities to spend money”. And last but not least, state aid would have prevented a wave of bankruptcies and thus job losses, one of the main causes of over-indebtedness.
Munich is with the “fever curve of over-indebtedness” in the national trend, said Ganzmüller, since the debtor ratio fell by 1.01 percentage points to 8.86 percent. In Bavaria, it fell by 0.71 percentage points to 6.43 percent, giving Bavaria the lowest rate of all federal states.
Over-indebtedness is an urban phenomenon, the rates are higher there than in the countryside because of the many poorly paid service jobs and high living costs. The debtor ratio is highest in the districts of Altstadt, Am Hart, Ramersdorf and Milbertshofen, and lowest in Obermenzing, Daglfing, Solln and Thalkirchen.
Despite the overall positive development, it should not be overlooked that most of those affected, around 60 percent, already have “hard over-indebtedness characteristics”. “The bailiffs come and go there,” explained Ganzmüller. In these cases, the way out is protracted and difficult.
Men are considered more willing to take risks when it comes to financial decisions
Over-indebtedness is still “male”, explained the Creditreform managing director, the debtor rate among Munich men is 10.38 percent, twice as high as among women. The reason is that men are considered more willing to take risks when it comes to financial decisions and, as the main earners, take on greater financial burdens. Debt ratios are declining in all age groups, but the decline is lowest among seniors. The higher cost of living in the city increased financial stress, especially for pensioners.
But the over-indebtedness of older people over the age of 70 was considered questionable by the Munich social officer Dorothee Schiwy at the video conference on the debt atlas. “In metropolitan areas, the high rents have an impact on the cost of living. It’s harder for the older generation to come to terms with it.”
In debt counseling, however, the needs of households with children in the expensive city are also a cause for concern, said Schiwy. The percentage of families among those seeking advice is twice as high as their percentage of the population. Contrary to the trend of falling debtor rates, the number of people seeking advice from the city and associations almost doubled during the pandemic.
The self-employed are currently causing the experts particular concern
The self-employed and small businesses are of particular concern to Schiwy. At the job center, the number of self-employed people who received Hartz IV benefits rose from 1,500 in March 2020 at the beginning of the pandemic to almost 5,300 at the end of 2020; At the end of 2021 there were still 3,400. Many self-employed people even released their provisions and savings for old age during the corona pandemic in order to compensate for the corona-related losses: “The question arises as to whether they will be able to do so after the end of the pandemic build up sufficient old-age provision again in the years to come.” Otherwise poverty in old age will increase.
With regard to energy prices, Schiwy emphasized that the grants for low-income households decided by the federal government are far from sufficient. The extraordinary increase in gas prices, which will increase with the Ukraine crisis, overwhelms these households. She criticized the fact that only those receiving housing benefit – in Munich just 4,100 last year – should receive the subsidy of 135 euros for single people and 175 euros for two-person households. Schiwy joined the demand of the Federal Association of Consumer Centers for at least 500 euros per household.
The decline in over-indebtedness is thanks to state aid, said Patrik-Ludwig Hantzsch, head of Creditreform economic research. “The money glut has saved consumers from the crash of job losses.” But companies were also saved that would have been considered unprofitable in normal times. If the aid ceased, such companies would go bankrupt, as has already been shown in Austria and Switzerland.
Added to this would be inflation and the Ukraine conflict, which would have an impact on energy and commodity prices. All of this, Hantzsch warned, “will lead to an increase in over-indebtedness in 2022”. Philipp Ganzmüller therefore advises consumers to be “cautious about spending” and to refrain from “impulsive purchases”.