As Germany enters recession, a look at life in Europe’s ‘economic powerhouse’ 


With no workers to fill job vacancies, bills spiralling out of control and a rise in drug addicts on the streets, Germany – still widely viewed as Europe’s economic powerhouse – slipped into a recession last week.

Once famed for the financial might of its currency, the truth is that working-class and middle-class people in Germany are feeling the pinch.

Rental, energy and supermarket prices are rising, tightening the purse strings of an already thrifty nation further.

Things got even more bleak in Germany last Thursday when it emerged that the economy suffered an unexpected dip in the first quarter of the year, formally putting the country into recession.

German economists said that soaring costs due to high inflation has reduced consumer spending. In fact, grocery bills are a staggering 28.6 per cent higher than they were in 2021. 

The country’s gross domestic product (GDP) fell by 0.3 per cent between January and March, according to data released on May 25 by the Federal Statistical Office. 

A homeless man sleeps by the Hansa Fountain in Hamburg, the second city of Germany - a country that was once the industrial powerhouse of the EU, but where citizens are now feeling the pinch

A homeless man sleeps by the Hansa Fountain in Hamburg, the second city of Germany – a country that was once the industrial powerhouse of the EU, but where citizens are now feeling the pinch

Another homeless person in the city. Rental, energy and supermarket prices are rising in Germany, tightening the purse-strings of an already thrifty nation furtherwhere

Another homeless person outside a pawn shop in the city. Rental, energy and supermarket prices are rising in Germany, tightening the purse strings of an already thrifty nation further

The unexpected dip is a major blow for the German government, which just weeks ago boldly doubled its growth forecast for this year after a feared winter energy crunch failed to materialise. 

As politicians leading its struggling coalition government scramble to help the economy rebound, problems are mounting across the whole country.

At Chaplin’s Pub, tucked away in a side street just two minutes’ walk from the main train station in Hamburg, Germany’s second largest city, barman Christopher Kruse, 60, says the country’s pub culture is dire straits.

‘During winter, I’d sit here sometimes with just one customer watching the football, so we were losing money by keeping it opening.

‘Pubs are closing left, right and centre. During Covid people got hooked on Netflix. They now think, “Should I go out and pay €4.50 for a beer when I can get a six-pack of cans at home and watch movies?”.’

Like many other European countries, Germany has a desperate shortage of workers.

According to the Institute of German Economics (IW), a staggering 630,000 vacancies were left unfilled last year in everything from nursing and healthcare to skilled trades, IT and the service sector.

This leaves those in work overstretched and overwhelmed, with many wanting to quit.

A man tries to raise money by selling newspapers so he can afford a concert ticket. Like many other European countries, Germany has a desperate shortage of workers

A man tries to raise money by selling newspapers so he can afford a concert ticket. Like many other European countries, Germany has a desperate shortage of workers

At Chaplin's Pub, tucked away in a side street just two minutes' walk from the main train station in Hamburg, Germany's second largest city, barman Christopher Kruse, 60, says the country's pub culture is dire straits

At Chaplin’s Pub, tucked away in a side street just two minutes’ walk from the main train station in Hamburg, Germany’s second largest city, barman Christopher Kruse, 60, says the country’s pub culture is dire straits

Mr Kruse said: ‘You can really feel times are tough. Finding staff is pretty much impossible. Those in work are having to do everything they can to keep customers coming.

Germany’s financial woes 

Inflation has risen by 7.2 per cent in Germany, according to the Federal Office of Statistics. 

Meanwhile, the household energy price rise for April 2023 compared to April 2022 was 21.1 per cent.

The average breakdown of Germans’ spending, published in March 2023 but based on 2022 statistics, was: 

  • 3.1 million households spent at least 40% of their income on rent
  • 1.5 million households spent at least half of their income on rent (without utilities)
  • 19.9 million main tenant households spent an average of 27.8 per cent of their income on rent.
  • Around 1.6 million other tenant households spent between 40 per cent and 50 per cent of their household income on gross rent.
  • One-person households were particularly hard hit, with rent burdens averaging just under a third (32.7 per cent) of their income.

‘We’ve not increased prices so we remain attractive, even though our own costs have skyrocketed. But we are making it work by offering shots for 50 cents to get people through the doors.’

Nearby is the Hansa Treff bar, run by Mehmet Simsit, 58, who sits outside having a coffee and cigarette with friends.

Just a few feet away is the Hansa Fountain which is supposed to symbolise the financial might of the Hanseatic League, the maritime trading network which ran from the 13th century to the 17th century, making Hamburg rich and powerful.

Ironically, today it’s a magnet for beggars, drug addicts and rough sleepers.

‘Things are really hard for everyone.’ says Mr Simsit. ‘Our costs are up between 30 and 40 per cent or higher. Just look at this coffee. Last year it cost me just 25 cents to produce it, today its 60.’

‘This neighbourhood has lots of problems. We campaigned against a toilet being set up in the square as it will just be used by the drug addicts, the homeless and the prostitutes.’

As he speaks, a woman sporting garish lipstick and a battered eye flashes a smile, despite having several missing teeth, at a group of British football fans who are getting the beers in.

‘This is a poor community, so it’s really hard for local customers to pay the prices, but we must still be firm, so I don’t let in any drug addicts, even though I’m a reformed junkie.’

‘I care for these people and work with organisations to help them out of destitution. But what is really alarming is that people society would class as ‘normal’ are now also becoming desperate.’

‘Each week I organise food handouts here in collaboration with a local church and high-end hotels. But now a lot of pensioners who worked all their lives and lived decent lives are turning up because they can’t afford to feed themselves.’

Mehmet Simsit (pictured), who runs the Hansa Treff bar, now located in area which is a magnet for beggars, drug addicts and rough sleepers

Mehmet Simsit (pictured), who runs the Hansa Treff bar, now located in area which is a magnet for beggars, drug addicts and rough sleepers

Near the Leihhaus, or pawn shop, where a homeless person is sleeping outside, Ibrahim Akan, 42, sales manager of the Aladin Center pound-store, says far fewer people are coming in to spend.

And at Bizim Berber hairdressers on the same street, Enver Pamuk, 60, says it is a daily struggle to keep prices low for people in this hard-up neighbourhood when his own overheads are soaring.

‘We’ve had to cut staff from six to three. But this doesn’t solve the problem, and we have had to therefore raise our prices from €10 to €15 for a cut.’

With its disadvantaged districts such as St Georg or the seedy streets of the famous Reeperbahn red-light district, Hamburg has its share of grit.

But this proud maritime city also has many other sides, and you can easily switch between vastly different areas, from run down to stunningly beautiful, in no time.

From the main station, whose entrance is guarded by a small army of beggars and boozers, it is just a one-minute tube ride to Jungfernstieg promenade, where you emerge to see the sun glittering on the Binnenalster lake before you, and can enjoy a drink while watching families sailing.

Just turn your head 180 degrees and you see not just the five-star Vier Jahreszeiten Hotel, but also the historic Alsterarkaden, a prestigious arcade bursting with boutique stores.

Other places where you can really feel the wealth of Hamburg, Germany’s fourth most expensive city, is by strolling around its affluent parts and just taking a peep at the real estate.

A pub-goer at Chaplin's Bar, where the owner says that even Germany's famous pub culture is struggling as the country battles mounting economic issues

A pub-goer at Chaplin’s Bar, where the owner says that even Germany’s famous pub culture is struggling as the country battles mounting economic issues

Harvestehude, Blankenese, and Eppendorf are all strikingly posh areas, with high-end properties including elegant villas and swanky studio apartments.

And yet even here people are tightening their designer belts.

Financial auditor Anna Prehn, 34, lives in the lush Winterhude district, home to a range of attractive properties on the front of the river Alster.

‘Prices increased especially for everyday things like grocery shopping. Fruits and vegetables are very expensive at the moment. What also increased is having dinner in restaurants.

‘I’m also worried about the development of prices for rental housing. It is really difficult to find a affordable flat in Hamburg and I hope that the prices will decrease in the future.’

The numbers back-up her observation, as the Verbraucherzentrale, a network of consumer protection organisations, reveals that the rise in grocery prices between April 2022 and April 2023, is a whopping 17.2 per cent.

Grocery bills in Germany are a staggering 28.6 per cent higher than they were in 2021 as the country enters a recession

Grocery bills in Germany are a staggering 28.6 per cent higher than they were in 2021 as the country enters a recession

The bad news does not end there, because much of the rise in grocery prices in Germany did not take place between 2022 and 2023, but during the previous year.

When you add it all up, the numbers are shocking. It means that since 2021, grocery prices in Germany have gone up 28.6 per cent.

Worse still, if you focus on the price of selected items, the difference between what Germans paid for goods in 2021 and 2023 is simply flabbergasting.

Bread rolls, for example, increased by 25 per cent, fish (28 per cent), milk (38-42 per cent), poultry (33 per cent), beef (40 per cent), semolina (42 per cent), noodles (48 per cent), margarine (59 per cent), wheat wheat flour (70 per cent) and sunflower and rapeseed oil (73 per cent).

Among its grotty neighbourhoods and lush boroughs are areas that are not stunningly beautiful but still relatively affluent, such as Eimsbüttel.

Strolling around the clean main street and leafy sides streets around the Osterstraße tube stop, local businesses say they are doing alright, but it is clear that the situation is very different to before the pandemic.

At the nearby Faire Fritzi children’s clothing and toy store, owner Kathi Plate, 39, explains why prices in her sector have increased.

‘Cotton prices in the country have risen considerably, which means more expensive clothing. But what makes us a bit of an exception to this situation is that our business did not exist before the pandemic.

‘On one hand this is really good because it means we don’t have to look back at pre-pandemic costs and think – oh heavens – look at the huge increases in costs.

‘On the other hand it means we are just starting out at a time when fewer customers are coming and they are spending less, so sometimes you think – phew – things really could be a bit easier. But we will manage.’

Other store owners are also struggling. Florist Britta Rohweder, 52, at die Straussbar, said ‘In tough times it is when folk cut-back on luxuries. And our costs rose around 35-40 per cent in Winter, so normally all this would be very worrying.’

‘But we have also focused on doing flower decoration for companies, weddings and funerals, so we are still doing well.’

The theme of cutting back is also an issue at the nearby wedding store Brautschuppen. Here Nieke Fischer, 26, explains: ‘We are doing well enough, but customers are most definitely cutting back on their spending, on average by €100 per person on last year.

‘What I find really sad is that many brides are also cutting back on certain services, like pre-wedding grooming to test out make-up and styles and things, and instead they are just doing it all last minute on the day, and so end up not as satisfied on the most important day in their life.’

For others, however, things are really not so bad. Sitting outside the boutique after some clothes shopping, Anne-Cecil Wedtgrube, 39, says: ‘Clothes prices at the more low-price stores like H&M are now up, but the pricier stores have not really increased their prices.

‘I therefore may as well keep shopping and have high-end stuff given that the low-end stuff is getting more expensive.’



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