It was the crowning glory. Not just any, no, the Jacobs one. In his childhood, Jacobs was a brand that stood for quality, says Joachim L. The man wears a fleece sweater over a red T-shirt in his apartment in North Rhine-Westphalia. It’s raining outside. L. dangles his glasses around his neck, sometimes pushing them up his nose to read. L. knows that he can’t afford the “crowning glory” at the normal price, that’s a thing that has long since been checked off. Since suffering a stroke, he has been receiving basic social security and, as he says himself, it is only sufficient for basic needs, if at all. So the branded coffee was only available from the range. Sometimes the prices dropped to 3.39 euros or even 3.29 euros. Then he bought a vacuum sealed pack of childhood memories.
In late summer 2022 there were special offers again, only this time for five euros. An exception? Joachim L. waited, but prices did not fall. Not with the coffee, not with the butter, and slowly he realized that it takes stamina to keep going. For drinking and eating, less than 200 euros per month are also provided for in the new standard rate of basic security. Eating a reasonably healthy and balanced diet was a balancing act even before inflation. At the end of 2022 it seems impossible for people like Joachim L.
The numbers are dramatic: According to the Federal Statistical Office, almost a third of Germans were not able to spontaneously raise additional expenses of 1150 euros and more in 2021. They lived “from hand to mouth even before the pandemic,” says Dorothea Mohn, financial expert at the consumer advice center in Berlin. This lack of cushion gives them little room for manoeuvre, observes Barbara Kremkau. She heads the debt counseling service of the Diakonie in Dortmund and says: “People are now getting into financial difficulties who have never needed support from the state before.”
The crisis hit three groups in particular: those who, as low earners or with basic income support, have always had to put the brakes on spending. Then those who have longer-term liabilities such as loans. Because of the inflation, financing plans would now falter “on which there was nothing wrong before,” says the debt counselor. Because additional costs for electricity, gas or food devour money that was planned for the monthly installments. Anyone who does not service an installment loan in the long term “slips into insolvency,” says Kremkau.
And finally, there is a third group that is looking for help, for example from Elisabeth Fey from the Caritas senior advice center in Cologne: pensioners. Fey reports from her conversations with people who have already completed their entire working life. “Some senior citizens no longer know how to pay for rent increases, electricity costs and food.”
20 percent could not service their loan
Some fall back on funds from the post-war period. Social organizations such as the Vdk or the Paritätische Wohlfahrtsverband observe that people eat less or heat less than is still healthy. In addition, the social, the participation in social life suffers. Those who have no money buy fewer bus tickets, travel less in public spaces and meet fewer friends or acquaintances. Joachim L. used to eat out two or three times a month, nothing big, just out. Twice at the Turks, the dish of the day for around eight euros, rice, meat and vegetables. And once home-style, maybe with two beers, then for around 15 euros. He allowed himself things like that when the ceiling fell on his head at home, when nothing worked anymore. But that’s the end of it. The gastronomy has raised its prices so much that Joachim L. had to cut back: once a month, that should be enough.
The credit agency Schufa, for example, is observing what the current emergency situation means in numbers: It found that 20 percent more people were unable to service loans or had defaulted in other ways compared to the previous year. The credit agency Creditreform considers an increase of 600,000 over-indebted for the coming year to be realistic. According to calculations by the Creditreform subsidiary Microm, every fifth household alone is at risk of not being able to pay utility bills directly in the new year. While politicians continue to call on citizens to save energy, those who have already been on the brakes are asking themselves: Where can we save now?
Many live on basic security because they are ill or injured
Joachim L. is not very interested in material things, it has always been like that. If he had little, he lived on little. He worked as a translator for a long time until he had a stroke 20 years ago. This left him paralyzed on one side and the realization that he probably won’t be able to work anymore. Since then he has lived on basic security, 449 euros a month. From January 2022, single people will be paid out a standard rate of 502 euros. The apartment and heating costs are provided by the job center. But the standard rate has to suffice for electricity, telephone, internet connection, shopping, clothing and going out from time to time.
Nevertheless, it was always enough in the first few years, he even managed to put back a little; a few marks here, later a few euros there. Even before the crisis, prices rose faster than basic security. The citizens’ allowance, which is now being increased by 50 euros in the middle of the crisis, does not compensate for the additional costs. “Then I’ll have a little less of the less due to inflation,” says Joachim L., looking at the price increases and smiling mischievously. He likes such puns, no matter how serious the content is. What does he do if the prices stay so high? Consume even less? “No,” he says, “because less is simply not possible anymore.”
Fast loans are particularly worthwhile for the lender
In normal times, life crises such as divorce, illness or accidents are the reasons why people get into debt. Now there are also the side effects of the Russian war of aggression. Some people have the reflex to bridge the payment difficulties with borrowed money. Offers to consume first and pay later are ubiquitous. Cell phones, kitchen appliances, laptops, cars or even clothing. The offers, which are mainly known from electrical discounters, are called “buy now pay later”, installment loans or “zero percent financing”. The monthly amounts look small, but it’s easy to lose track, says debt counselor Barbara Kremkau. “This time here, time there is classic with our clientele.” In the end, there is a danger that a vicious circle will emerge and debts will be paid with debts.
It gets really expensive with the lowest-threshold type of credit, the overdraft facility on the checking account. Dorothea Mohn from the consumer advice center warns that the highest interest rates are usually charged on the current account. According to an investigation of the journal financial test the overdraft interest in 2022 ranged from four to almost 15 percent. Dorothea Mohn issues another warning against “ominous credit providers” who do not want to see credit bureau information or proof of income for supposedly cheap loans. “If no credit check is required, all alarm bells should always ring,” says Mohn. In most cases, such transactions would be worthwhile for the lenders, who paid for the uncertainty with high interest rates, says Barbara Kremkau. “They do their business with people’s poverty.”
Many do not know what they are entitled to
Barbara Kremkau is finding it increasingly difficult to allay people’s fears in counselling. She also cannot predict when the war will end and whether prices will then fall. Economists no longer expect a double-digit figure for the coming year, but still anticipate inflation of five percent. So prices keep going up, just not as much. “We can only provide information as best we can and draw attention to additional help,” says Kremkau. Elderly counselor Fey observes that older people find it more difficult to claim state aid because they are more ashamed. “Nevertheless, if money is tight, you should apply for housing benefit or basic security in old age and assert your rights,” she says.
Barbara Kremkau also sees the hurdles in the lack of comprehensive information. “That should now be communicated to the general public,” she says. Many would not know when they are entitled to housing benefitthat some cities or municipalities like Munich, additional help for people affected by poverty spend and how to make one Application for child allowance puts. Barbara Kremkau advises seeking social counseling from the Red Cross, Caritas, Awo or Diakonie. “They can help to see whether all the help has really been exhausted.” But the debt counselor also criticizes the fact that the federal, state and local governments hardly provide any money for jobs in social counseling. For social workers who help before stubborn financial difficulties arise.
Joachim L. is of course familiar with the applications, so there isn’t much he can do about it. And buying on credit is not an option for him. “No way,” he says. “I used to have some debts and I don’t want to ever go back into them.”