independent

Sunday 20 April 2014

The budget lesson I learned while drinking beer with young Germans

While sitting with some German friends in a Munich beer garden at the weekend I became ever more convinced we Irish have a lot to learn when it comes to managing our money.

As post-Budget blues cast their inevitable pall over the country following on from Michael Noonan's gloomfest in the Dáil on Wednesday, perhaps it's time to have a major rethink about embracing good old fashioned German-style thrift.

And nobody does thrift with such style and panache as the Germans – who of course also enjoy the highest living standards in Europe.

Here in Ireland it's a bit of an insult to be labelled as financially "tight'' but in Germany it's the way the majority of people live. Survey after survey shows they really have an aversion to splashing the cash – and when they do, value for money is paramount.

Out of the eight young Germans with me in the beer garden at the weekend – all in their mid to late 20s – none of them owned a credit card.

As the evening wore on, and we discussed the problems of the Irish, the Greeks, and other troubled euro economies, it became clear what could be described as sensible frugality, coupled with an almost morbid fear of debt, straddles most layers of German life.

My friends spoke of how cautious their parents are of banks and other financial institutions, other than as a safe place for their savings.

Survey after survey also shows cash is king for these debt averse Germanics. Such is the antipathy towards credit cards a €500 banknote is often used for substantial purchases rather than resorting to plastic as we do in Ireland.

Figures show that allowing credit card bills to run over at the end of a given month is simply not an option for the majority of the population. This, after all, raises the much dreaded spectre of personal debt.

Therefore it's not surprising that only about a third of Germans over 15 actually own a credit card.

To echo Angela Merkel in her countless chastisements to ourselves, the Greeks, etc: everybody is expected to live within their means. "Why should anybody be allowed to borrow and spend money they don't have?'' asked one of my companions incredulously.

The ordinary German remains one of the most enthusiastic savers in Europe, largely ignoring risk-taking such as buying shares, while preferring to opt for rock solid security for their cash such as the main banks, or blue chip life insurance companies.

And although the powerhouse which is their economy dominates the rest of Europe, none of my German friends were living in either a house of apartment which they owned.

Again the figures show they are not particularly unusual. A recent survey put home ownership in Germany at as low as 40pc, way behind some other European countries.

It's fair to say the Germans will never take to the 100pc mortgage idea so popular during our own madcap Celtic Tiger years. In contrast, their lending institutions often insist on a down payment of 20pc, or in some cases alternative collateral from prospective homebuyers.

So it's easy to see why Angela Merkel is domestically so popular, when she argues that the bottom line is that Irish and free-spending southern Europeans must simply learn to live within their means.

Many theories have of course been put forward as to why the Germans are so financially cautious – most notably the collapse of the Deutschmark in 1930s Depression and the terrible state of the country after World War Two.

But in the Munich beer garden this was dismissed as over simplification provoking the retort "we're just very cautious with our cash – and we don't like being in debt''.

And as I bought another round of drinks with my credit card one of my companions whispered in my ear "you should get rid of that. It only creates delusion. It's one of the things that ruined your country".

I'm going to take his advice.

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