The state covers the heating costs for the poorest. The exploding energy costs therefore do not hit welfare recipients hardest, but low earners and pensioners. But every third household has no reserves for this, there is a risk of a wave of debt.
According to experts, the sharp increase in energy prices will hit pensioners and low-income earners harder than the unemployed and those on social security. Because with the latter, the state assumes a large part of the costs, as announced by the Federal Employment Agency and the German Association of Cities.
According to the DIW economic research institute, a significant proportion of the working population has no financial reserves. The credit agency Crif considers a creeping wave of debt to be possible. "One in three households in Germany has no significant savings that they can fall back on in these times of crisis to cover the higher costs for heating or groceries," said Marcel Fratzscher, President of the German Institute for Economic Research (DIW). "They are the ones who have been hit doubly hard by this crisis: they personally experience inflation that is three to four times higher than high-income people, and they have no insurance to deal with the additional costs."
Social welfare recipients would be reimbursed for the costs of food and accommodation, said Hans Maier, director of the Association of Bavarian Housing Companies. "That's not our biggest problem group. It's the people who don't receive housing benefit or social assistance, such as pensioners." The Catholic welfare organization Caritas shares this assessment. A spokesman for the Bavarian Caritas regional association said that the higher costs for heating would not affect people who receive state benefits under Social Security Codes II and XII. Because they could claim the increased costs at the job center or social welfare office. And these would usually be taken over in the actual amount. Hartz IV and social assistance are regulated in the two codes of law.
According to Caritas, the bigger problems will be had by people "who are not receiving benefits". According to DIW President Fratzscher, there are more than two million top-ups in Germany - that is, employees who, despite their salary, are dependent on additional state aid. "Many would also be entitled to housing benefit as employees, but do not take advantage of it," said the economist.
So far, many citizens have not yet fully felt the rise in energy costs. Almost all experts believe that this will change in the next few months. The Bavarian housing companies (VdW) estimated in July that the increase in the average gas price from 7 to 13 cents per kilowatt hour would mean additional costs of 1700 euros per year for an average household. That would be a good 140 euros per month. Since then, according to the Verivox portal, the gas price has risen again by around five cents, and a further increase is expected. In addition, there is the gas levy, the amount of which the federal government wants to announce on Monday. And apart from gas, groceries, electricity and many other things are likely to become more expensive.
"The increase in energy costs will not only affect emerging households, but also medium-sized companies," predicted VdW director Maier. "I believe that more people will no longer be able to pay the advance payments, and maybe at some point they will no longer be able to pay the rent." Chancellor Olaf Scholz has promised further help for the citizens, but the amount is not yet clear. In the long run, less income leads "first to over-indebtedness and then possibly to personal bankruptcy," said Frank Schlein, managing director of the credit agency Crif. "People who file for personal bankruptcy do not necessarily have to be heavily indebted." The majority of those affected have a total debt of less than 10,000 euros.
The financial situation will worsen, especially for financially weak households - "also because the financial reserves have been used up due to losses in the corona pandemic," said Schlein - for example due to short-time work. Crif expects up to 95,000 consumer bankruptcies this year, with more next year. The state, including municipalities, is also faced with high additional expenditure - for the unemployed and recipients of unemployment benefit II (Hartz IV) as well as for people who receive actual social assistance because they are no longer able to work. The additional expenses to be expected are particularly high for Hartz IV.
The Association of Cities estimates the total expenditure for accommodation in 2021 at 14.1 billion euros, of which the municipalities contributed around 4.2 billion. "If heating costs double, the cost of accommodation would increase by an estimated 1.5 billion euros, and if heating costs tripled, it would be an additional 3 billion euros," said a spokesman for the city council. Municipalities would have to raise around 500 million euros if heating costs were twice as high, and around 1 billion euros if heating costs were three times as high. "At the moment we don't have an overview of how much there is in total," said Helmut Dedy, the general manager of the city council. "But one thing is clear: anyone who receives social benefits needs compensation for rising energy costs - there's no question about it. And the additional burden on municipalities with social spending will not be trivial."
Caritas is already observing increased inquiries in its advice centers, "also a great deal of uncertainty and concern," as a spokesman for the Bavarian Caritas regional association said. Small pensions are often only a few euros above the level of social assistance. "People with low incomes usually do not have economical electrical appliances, often have drafty windows, old gas boilers and poorly insulated apartments, which exacerbates the whole problem," said the Caritas spokesman.
