Greek troubles worry frugal Germans A man shops for vegetables in Berlin. Picture: AFP Source: The Australian TO better understand Germans' unease over subsidising their southern neighbours, consider Berliner Niko Strogies. The 28-year-old mathematician has never taken out a loan, rarely uses his credit card, and saves about 10 per cent of his pay cheque every month. He recently bought a car with cash. "I've never bought anything without having the money for it," Mr Strogies says. His behaviour, multiplied across the population of Germany, Europe's biggest economy, helps explain the economic imbalances that have fed the euro zone's crisis. For years, German consumers' reluctance to splurge has left German companies reliant on exports for growth. Other euro-zone economies, meanwhile, have had to live with sluggish exports to Germany, with its large economy. At the same time, the strong euro has made products from the peripheral countries less competitive outside the euro zone. On top of this, the weaker countries' low savings rates are forcing a reliance on foreign investors to finance their deficits. Now, frugal German taxpayers like Mr Strogies are on the hook for bailing out some other European countries where borrowing has been a way of life. It's one of the issues fuelling tensions within the euro zone as Germany and France this week began the delicate task of trying to convince their major banks to voluntarily accept losses on their holdings of debt in Greece, which faces a cash crunch despite a bailout last year. Germans' deep-seated economic caution has roots in the ruinous wars and inflation of the last century. Many of today's Germans are as frugal as ever, on average saving 11.5 per cent of their incomes in 2010, according to the Organisation for Economic Co-operation and Development. That compares with a savings rate of 5.7 per cent in the US last year. In Ireland, one of the euro-zone countries that is getting a bailout, the average savings rate last year was 11.1 per cent, near that of Germany -- but the rate only rose after the shock of the global financial crisis, and follows years of much lower saving. Meanwhile, in Greece, residents on average spent 12 per cent more than they earned in 2008, the latest year for which data is available from the OECD. "Risk-averse Germans are concerned about the problematic economic behaviour of some of their neighbouring countries," says Thorsten Hennig-Thurau, a professor at Munster University, who studies consumer habits. That, he says, explains many Germans' growing nostalgia for their beloved former national currency, the Deutsche mark. Although there are some signs that Germany's improving labour market could boost consumer spending, economists say German households aren't about to become free-spending drivers of Europe's growth. Germans typically invest their savings conservatively too, preferring savings-bank deposits that offer low interest rates to higher-yielding but riskier investments such as stocks. When Mr Strogies and his girlfriend, after having a baby last year, decided to buy a bigger car, they drew on their savings to buy a used Nissan Primera for about 10,000 euros ($13,535). "My parents taught me that you can only pay with the money you have," Mr Strogies says. I think that's deep in the German philosophy. That attitude is widespread -- and makes Germany a tough market for credit-card companies. "The word 'credit,' in the German mindset, is negative," says Werner Decker, country manager for Germany at American Express Co. One consequence of this culture: Debit cards are far more common in Germany than credit cards. Most Germans want "a payment tool, not a credit tool," Mr Decker says. Greeks have started to feel the consequences of rash spending decisions as Greece's economy lurches through its worst recession in more than 15 years. "Unfortunately our membership is growing day by day," says Theodore Thanopoulos, head of a group that helps Greek debtors, the Panhellenic Association for the Protection of Borrowers from Banks and Public Organisations. In the past five years he has seen his membership rise more than fourfold to 1.5 million -- or nearly one in five Greek adults. That coincides with the boom in consumer lending in Greece, which led to a consumer frenzy as many Greeks splashed out on new cars, new homes and expensive foreign vacations. Now many Greeks are having to slash their spending at the same time as their government -- which behaved similarly -- is forced to cut its huge budget deficit, pushing the economy into a deep slump. Ireland, Spain and Portugal are also suffering after bingeing on credit for years. To alleviate the pain of retrenchment in the euro zone's weaker economies, economists say, solvent countries, led by Germany, need to spend more to help boost their exports. Policymakers around Europe have urged Germany's government to stimulate spending with tax cuts. But many observers doubt it would work. If the German government sent out stimulus cheques as the US did, says Mr Decker of American Express, "I would say 98 per cent" of the population would put the money straight into their savings accounts. Additional reporting: Alkman Granitsas