Caught in the Cold: Long Winter's Grip Chokes German Economy

Photo Gallery: German Industries Suffer from Long Winter Photos
DPA

Winter's hold on Germany lasted longer than usual this year, taking its toll not just on the moods of residents, but also on a number of economic sectors. Construction, agriculture, service and retail are all suffering, and experts warn the effects could be long-term. By SPIEGEL Staff

Just last Friday, Dirk Nüsse stood at the summit station of his ski lift, looking out at the landscape incredulously. According to the calendar, it should have been spring there a long time ago, but before his eyes a snowboarder was cruising by wintry spruce trees, while frost-covered cable cars conveyed a seemingly endless number of winter sports enthusiasts up the mountain.

There is a thick blanket of snow on the Wurmberg, a peak in central Germany's Harz Mountains, one of the few places profiting from the cold weather that has held Germany in its grip for months. "The entire country is suffering from the cold temperatures, but we're clearly the winners of this long winter," says Nüsse. The 56-year-old manager of the Wurmberg cableway is glad that spring simply refuses to come this year. Ski season is normally over by mid-March, but he has just extended his winter operation by yet another week, which means that some 15,000 additional holidaymakers intend to hit the mountain's seven slopes. During a long winter like this, Nüsse's lift earns twice as much as usual.

The rest of Germany has become increasingly exasperated by the long winter, though. The entire country is talking about the weather. Although it was surprisingly mild at Christmas, the country has since plunged into darkness and cold -- bringing one low temperature record after the next.

Not since the beginning of nationwide weather records in 1951 has a winter been so dreary, and this March was among the six coldest since 1881. In the Ore Mountains of eastern Germany, the mercury dropped to minus 21 degrees Celsius (minus six degrees Fahrenheit) in the middle of the month.

But the long winter has strained more than just nerves. The German economy could still be reeling from the aftermath of the icy winter throughout the rest of the year -- even if spring weather finally arrives in full force this week. During the first two months of 2013, nearly two-thirds more employees stayed home on sick leave as the previous year. The diagnosis "flu-like infection" was made 86 percent more often. The KKH health insurance company says that colds and the flu alone have caused a loss in productivity of at least €5 billion ($6.5 billion).

'Negative Impact on the Economy'

Germany's ADAC automobile club estimates that cities and communities will have to spend roughly €3 billion more this year to fill potholes, something which has become a hot issue in every local newspaper.

"Of course the never-ending winter is having a negative impact on the economy," says Rolf Kroker from the Cologne Institute for Economic Research (IW). "The construction industry has been particularly hard hit by the bad weather," he notes, but it's clear that other industries such as the restaurant trade and the retail sector have also suffered enormously.

Economists at the German Chambers of Industry and Commerce (DIHK) anticipate that the frosty weather could cost the German economy roughly €2 billion. Although individual sectors are still reluctant to comment on the extent of the damage, it's already clear that it won't be possible to make up for all the losses.

Steffen Kirchner is a typical example. The owner of Loretta, a popular bar and restaurant on the Wannsee lake in Berlin, set out his outdoor tables and benches in March. It was just before Easter, the first sales highlight of the year, when the beer garden, with room for 1,300 guests, is usually packed with customers enjoying a view of the lake.

But instead of customers came the cold. "Our sales on Easter plummeted to less than 10 percent of what they were the previous year," says Kirchner. The ice damaged the tables and benches that had already been set up, and workers had to be sent out repeatedly to shovel away the new snow. He has to pay seasonal workers who have already been hired, but he can't use them.

"We are just barely managing, but our reserves will eventually run out," says the proprietor. "At this time of the year, the Berliners should already be kicking back and relaxing here, and the place should be full of tourists on the weekend." But there is still snow along the shores of the Wannsee lake.

Agriculture and Construction Suffer

There are many who, like Kirchner, have run into trouble because their businesses depend on the weather in one way or another. In garden centers and hardware stores, for example, there are untold numbers of pansies and primroses that should have been sold long ago. Due to the low temperatures and the lack of sunshine, greenhouses have to be heated at great cost. The industry's association estimates a drop in sales of 30 to 50 percent this spring -- an irretrievable loss.

The weather has also made farmers nervous as they are forced to stand idly by and wait for the spring weather. "Nature is still in the midst of winter," says Michael Lohse of the German Farmers' Association, "and the vegetation is at least two to three weeks behind schedule."

For farmers this means that spring fertilization has to be postponed, potatoes can't be planted and the asparagus, Germany's beloved springtime vegetable, is not growing. Although it's still too early for the Farmers' Association to cite any figures, the situation is clearly nerve-racking. "Spring sets the stage for the entire year -- it dictates the harvest and the prices," says Lohse.

The same holds true for the construction industry. The Central Federation of the German Construction Industry is referring to a "winter paralysis." A drop in sales of nearly 11 percent was registered already back in January. Not surprisingly, this was due to "frosty temperatures which nearly brought construction activities to a standstill," according an association official.

The long winter is not just expensive for small and medium-size businesses, either. For Germany's national railway operator Deutsche Bahn, for instance, every icy day costs money. Following recent winters plagued by breakdowns and delays, this year the company wanted to get back on track and invested millions in defrosting systems for trains, snow removal equipment and heating systems for rail switches. With a winter task force of 20,000, the railroad also has twice as many staff members standing at the ready along the train routes as in past winters. All in all, this year's anti-winter-chaos program will cost around €50 million, according to company officials.

Consumers Sluggish Too

The good news is that most season-related losses like the current ones will, at least from a macroeconomic perspective, be recovered throughout the course of the year. Planned investments in production plants and highways have merely been postponed, not canceled.

On the other hand, there are a number of indications that the catch-up effect could be less pronounced this year. "Construction companies are booked up," says DIHK economist Dirk Schlotböller, adding that "many have no capacity to complete the projects that have been postponed due to the weather."

As absurd as it sounds, since the construction industry has too many building contracts, Germany runs the risk of only making minor gains on this front. To make matters worse, the first few months of the year generally have a decisive impact on growth for the entire year: "A miserable initial quarter has a particularly negative effect," says Kroker from Cologne's IW institute. DIHK expert Schlotböller is thus pinning his hopes on consumers: "If we still intend to manage a decent year," he argues, "then we'll need a strong increase in domestic consumption."

Yet this is precisely where the Germans are holding back. Clothing stores in particular are noticing a drop in shopping activity. Apparel retailers reported a 22 percent decline in sales in the last week of March -- a new all-time low. In addition to significantly fewer customers in the stores, those who did venture inside made fewer purchases.

"The long winter is leading to increasing frustration, reluctance and exhaustion," says Stephan Grünewald, a psychologist and author of the book "Die erschöpfte Gesellschaft" (or "The Exhausted Society"). Spring is normally a time of awakening, he says. Instead, the nation fallen into an odd torpor, a paralyzing sense of listlessness, he says. "People don't feel the urge to change, which is making life difficult, for instance, for the fashion and cosmetics industry."

But perhaps there are simply budgetary reasons for the current reluctance to make purchases. Although unemployment is declining and workers' wages are rapidly rising, millions of homeowners and renters are facing a massive heating bill.

Germans annually spend an estimated €40 billion on oil, gas and coal. If the heating period lasts particularly long, as it did this winter, expenditures can easily rise by 10 to 20 percent. As a result, consumers rapidly find themselves short on billions of euros. The Consumer Association of North Rhine-Westphalia, the country's most populous state, has calculated that an average family will have to contend with additional costs of €140 this year.

BY SUSANNE AMANN, MAX BIEDERBECK, SVEN BÖLL, SYLVIA GANTER AND ALEXANDER MÜLLER

Translated from the German by Paul Cohen

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