German rallying cry is 'cash only'
BERLIN — When a member of the German government's council of advisers suggested in May that the country move to a cashless economy to boost consumer spending and reduce tax evasion and money laundering, he set off a thunderclap of opposition.
"The idea of abolishing cash is an abomination," wrote Berliner Andreas Schaumburg, 52, who joined the Stop the Cash Ban Facebook group with 1,000 other Germans after reading economist Peter Bofinger's proposal.
In Germany, abandoning cash is nothing short of heresy. This is a nation that prides itself on thriftiness, paying its bills, avoiding debts and even shunning credit cards. Which explains why the word for debt, schuld, also means guilt.
And that mindset also explains why Germany has taken the hardest line against extending more credit to Greece, which is living the other extreme: mired in more than $300 billion in debts it can't repay and pleading for another $100 billion from Germany and other lenders to avoid bankruptcy.
Germans conduct 80% of their financial transactions in cash, compared to 50% cash transactions by Americans, according to a 2014 study by Germany's central bank.
"Of course I prefer paying in cash," said Berlin stonemason Sebastian Savelsberg, 37. "I have a much better overview of my finances that way."
"People want to be in complete control over their spending," said German Economic Institute analyst Karl Brenke. "The logic is that when you pay in cash, you can only pay as much money as you have available so you won't overspend."
In fact, the 500-euro note was created more than a decade ago as a concession to Germany.
Every cent also counts in Germany. The German Finance Ministry found that the average German has 175 one- and two-cent euro coins collecting dust in drawers, piggy banks and elsewhere. That's more than any other European country, the ministry said.
Germany's cash obsession is deeply rooted in the scars from its economic crisis between World War I and II. Hyperinflation sent prices skyrocketing. By 1923, one U.S. dollar was worth more than 4 trillion German marks. A loaf of bread cost 200 billion marks, and people literally lugged wheelbarrows of cash to pay for daily needs.
After losing World War II and suffering massive destruction, Germans believed frugality and hard work would help them recover. The deutschmark became a symbol of West Germany's miraculous recovery and a source of pride.
"People see the deutschmark and the euro now as symbolic of Germany's economic upswing," said Federal Association of German Banks spokesman Thomas Schlüter.
Even though a reunited Germany today has Europe's largest and most robust economy, those past hard times have left their mark on the national psyche. That differs from the American experience: Those who lived during the Great Depression of the 1930s were frugal and big savers, but future generations have become far more profligate.
The contrast shows in a 2014 U.S. Federal Reserve report. The average German wallet contains $123, almost twice as much as the average American's $74.
Similarly, the German Central Bank found that only 32% of Germans own a credit card, compared to 53% of Americans.
In addition to the nation's economic trauma between the two world wars, Germans who lived under the communist surveillance state in East Germany until reunification in 1989 tended to use only cash so they would leave as few traces of their financial dealings as possible. Recent revelations of controversies over snooping by the National Security Agency and domestic spy scandals have fueled distrust of keeping electronic financial records.
Those concerns explain why Germany's privacy laws are among the strictest in the world.
"The main reason people give for preferring cash is anonymity compared to card payments. People are just more cautious in Germany," said Helmut Hammes, head of the German Central Bank's cash department.
Savelsberg said he doesn't trust credit card companies or other middlemen to keep his transactions private. "Germans are much more private and cautious of technology," he said.
Although German credit and debit card payments have increased 800% in the past 20 years, according to the EHI Research Institute, Germany is still behind its neighbors in using plastic.
The average German uses a credit or debit card 39 times a year, a fraction of the 167 annual transactions by Brits and 230 by Swedes, who lead Europe in credit and debit card usage.
German banks and businesses would like to see less usage of cash because of the cost-savings in processing transactions, but bank association spokesman Schlüter says customers won't be pressured to give up their cherished cash.
And using cash here can be contagious, said British teaching assistant Heather Purcell, 28, who has lived in Berlin for five years.
"I had a year of living here where I was shocked by the inconvenience — it was annoying at the beginning," Purcell said. "But I think I'm used to it now."