Consequences of the crisis – a question of perspective

July 2009

More than four million results are found by Google for the question “What will happen after the crisis?” Everyone from a Bavarian blogger to the “Welt” financial expert is discussing this. The spectrum of scenarios ranges from mass unemployment to a more just society. Germans are viewing the future with mixed feelings, and their expectations depend mainly on which stage of the crisis they believe Germany to be in.

Most Germans believe the future of their society will see a larger gap between rich and poor. Overall, around 95% of the approximately 2,000 people surveyed believe that the crisis will divide society further, according to a recent study by the GfK Association.

The survey also revealed that some consumers are horrified by the red figures in the public balance sheets. Almost 90% of citizens are anxious about the level of debt, which actually is continually rising. By 2010, the level of new debt is expected to reach around EUR 90 billion, putting it at absolute record level.

Almost 70% of those surveyed put inflation at number five in the list of crisis consequences and fear that inflation cannot be far behind whenever money is being injected into the state. This is hotly debated among experts. Currently inflation is barely an issue, with the rate at 0% in May. Although consumer prices rose slightly in June, they remained moderate. Year on year, Germans are making savings on dairy products, vegetables and consumer electronics in particular, according to the national statistics office. Despite falling prices, consumers remain skeptical. Furthermore, the development of the euro is viewed as unsettling, and it is feared it may fall against the dollar. However, this factor is relatively low on the list of future worries.

It is not just economic development that concerns people. Many also have fears about sentiment in their country. Around 70% of those surveyed see greater selfishness and less solidarity, placing this issue in the top 3 concerns for the future.

Hoping, as well as complaining

The list may surprise anyone who had the Germans down as a nation of complainers, as it also contains positive factors. More control over the financial markets is not only a wish, but an expectation of the majority and half of those surveyed believe that the necessary reforms will be more quickly implemented after the crisis. At least 40% expect an increase in value of the “made in Germany” stamp and a further quarter have not yet totally written off the much criticized financial system. Some believe that the crisis may make it fairer. A third believes that the crash may even be good for Germans themselves, expecting a return to brotherhood and mutual support. Almost two thirds also expect that the crisis will lead to more modest consumption, and the same number think that people will return to more traditional values.

Pessimists: “The worst is yet to come”

The crisis is already leaving its mark on the bank balances of a significant number of those surveyed. At least 20% have incurred losses to deposits or assets to a varying degree. A similar number have had to suffer a cut in income since the crash. It appears that those more strongly affected financially have greater fear of inflation and more widespread selfishness. However, the current general mood is having a far greater effect on future outlook than personal situations. The survey shows that a person’s assessment of the stage of the crisis depends on how strongly a consumer believes in positive or negative consequences. About 6% of Germans believe that the downturn has already ended and Germany is now on the up and are significantly more optimistic overall. Nearly 40% of those surveyed believe that the worst is yet to come and have a more pessimistic outlook. Around 30% of consumers sit between those two camps, not expecting an imminent upturn but also believe the worst is over and are also more relaxed about many aspects of the future.

The view of the inflation trend is especially mixed. Inflation worries plague almost 80% of pessimists; the figure for optimists is considerably lower than this, at 50%. Those who see a dark future also have far greater worries over the stability of the euro, and believe more strongly that the social climate will become frostier. Over three quarters of the pessimists fear more selfishness, compared to just under 60% of optimists. Those who fear for the job of the principal earner are more likely to believe that an attitude of “every man for himself” will prevail.

Optimists: the crisis is an opportunity

On the other side of the fence, the optimistic group is more hopeful regarding positive consequences of the crisis. They believe more strongly that the crisis offers opportunity for change; almost 80% believe that the financial system will be better controlled in future. 60% say that necessary changes will be more quickly implemented, and almost 40% see the possibility of more fairness in the international financial and economic spheres. Those who believe that we have not yet seen the worst of the crisis are significantly more negative regarding all of these factors.

Neither optimists nor pessimists can foresee what the future will actually bring, but their actions will contribute to how the economy develops in the future. In “Philosophie der Freude” (Philosophy of Happiness), Epikur reminds us “not to forget that while the future is not in our hands, it is not completely outside of our control”.

Data source: GfK Association (Omnibus survey, May/June 2009).

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