“It used to cost 5 Deutschmarks and today it’s 5 Euros!” – Are you sometimes still nostalgic about the old days? In fact, today this rate applies to some categories of goods whose prices have increased enormously since 2001. But there is a catch.
When you look at the prices in the supermarket, tears can already run down your cheeks. A 10-pack of organic eggs sometimes costs more than three euros, a package of butter even costs up to 3.50 euros, and a kilogram of sugar has long since cost more than one euro. Anyone who wants to bake Christmas cookies will have to dig much deeper into their pockets this year than before. It is not only now that the impression is emerging that many goods – not just groceries – are more expensive today in euros than they were in the days of the Deutsche Mark.
This impression is reinforced when you look for old brochures on the Internet. Offers from the now defunct discounter Allkauf from 1995 advertise a kilo of roast beef for 8.98 Deutschmarks. Today you pay more than 11 euros in the supermarket for the same amount of meat. The pack of peaches for 2.22 Deutschmarks per kilo also corresponds to today’s euro price of around 2 euros for the same quantity.
However, such considerations are misleading. Firstly, the last D-Mark days are now almost 21 years ago. On January 1, 2022, the euro was introduced as a means of payment. This means that all prices have had more than two decades to increase by around 100 percent in order to adjust their euro price to the last D-Mark price. An average inflation rate of 3.2 percent per year is sufficient for this.
In most years since the introduction of the euro, however, the general inflation rate has been significantly lower, especially in the years between the financial and energy crises. Accordingly, there are only a few products that are so far above the average that their current euro prices have actually overtaken the old D-Mark prices.
Not surprisingly, almost all forms of energy are at the top: Liquid fuels, such as liquid gas for heating, kerosene or denatured alcohol lead the list with price increases of 260 percent since 2001. Some distance behind are solid fuels, which include firewood, wood pellets, charcoal and the like (173 percent), electricity (172 percent) and natural gas for heating (169 percent). With diesel and petrol as well as motor oil (123 percent) and district heating (118 percent), two other energy sources are among the products that cost more in euros today than they used to in deutschmarks. For example, the amount of liquid gas for which you would have paid 1 D-Mark in the past now costs 1.84 euros. Electricity has risen from 1 Deutschmark to 1.39 euros.
Overall, there are products from ten product categories to which this statement applies. From the food sector, this includes edible oils, which have recently seen sharp price increases, especially sunflower and rapeseed oil and fats such as butter (149 percent) as well as fish and seafood (101 percent). In addition, flight tickets (112 percent) are at the top of the list because of the high kerosene costs and tradesmen’s services for the home, such as plumbers and carpenters (107 percent). The eggs mentioned at the beginning are even cheaper in the new currency than they used to be in the D-Mark, with inflation of 79 percent since the introduction of the euro.
However, such an approach ignores the fact that the incomes of Germans have increased significantly over the past 21 years. That at least partially offsets inflation. The logic behind this is simple: if a product doubles in price, but so do your wages, then you can still afford as much of it as before.
Although gross wages in Germany fell during the Corona crisis and are lagging behind the inflation rate this year, overall they have made a significant leap forward since the introduction of the euro. On average, a German employee earns 75 percent more money today than in 2001. You’ll notice that that’s less than the price of the top products has risen. Nevertheless, it mitigates the inflationary effect somewhat.
Adjusted for purchasing power, the prices of liquid fuels no longer rose by 260 percent, but by 105 percent. Conversely, this means that an average citizen could only afford half as much of their current salary as they could 21 years ago. For solid fuels, electricity and natural gas, real inflation is 54 to 56 percent. That means a loss of purchasing power of around 35 percent. Butter and edible oils have a real inflation rate of 42 percent, the loss of purchasing power here is almost 30 percent.
If we calculate with real inflation, then the euro prices today are only higher for liquid fuels than the corresponding D-Mark prices from 2001. The amount that was available for a D-Mark at that time would be 1 today, cost 05 euros.
The more time has passed since the introduction of the euro, the more frequently it will happen that euro prices are higher than the last D-Mark prices. Today, as I said, this applies to products that have risen in price by an average of 3.2 percent per year since 2002. In 2025 it already applies to all products with an average price increase of 2.8 percent per year, in 2030 it will be 2.3 percent and in 2040 only 1.7 percent. But: The more time passes, the fewer people there will be who can even remember the D-Mark. Already today, 18.5 million people in Germany are younger than 20 years old, so they have never experienced the old currency. That is already 22.2 percent of Germany’s population.
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