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Real earnings in Germany declined by 4.1 per cent in 2022 year-on-year due to rising consumer prices. This was the sharpest drop since the start of the time series in 2008, according to preliminary figures published by the Federal Statistical Office (Destatis).

The record 7.9 per cent annual inflation in Europe's largest economy last year more than offset the 3.4 per cent increase in nominal earnings, according to Destatis. Real earnings had already declined in the previous two years due to the Covid-19 pandemic, Xinhua news agency reported.

As a result, a growing number of Germans are using overdraft facilities to pay their bills. According to the Federation of German Consumer Organisations (VZBV), one in seven consumers overdrew their bank account between September and December last year.

"The increased cost of living is a risk of over-indebtedness for consumers," VZBV Executive Director Ramona Pop warned last week, stressing that overdraft facilities were "far too expensive to make up for financial shortfalls in the medium or long term".

Households with low incomes are particularly affected by high inflation. For them, inflation was as high as 8.8 per cent last year, just under one percentage point more than the overall inflation rate, according to a recent study of Germans' spending behaviour by the Macroeconomic Policy Institute (IMK).

For high-income single people, on the other hand, inflation was only 6.6 per cent. This "social gap" in the severity of inflationary pressure had narrowed to some extent as a result of the latest government relief measures, but was "by no means closed," the institute said. (1 euro = 1.07 US dollar)