U.S. markets close in 45 minutes
  • S&P 500

    3,690.48
    +104.86 (+2.92%)
     
  • Dow 30

    29,573.34
    +847.83 (+2.95%)
     
  • Nasdaq

    10,861.98
    +286.36 (+2.71%)
     
  • Russell 2000

    1,715.49
    +50.77 (+3.05%)
     
  • Crude Oil

    83.28
    +3.79 (+4.77%)
     
  • Gold

    1,706.70
    +34.70 (+2.08%)
     
  • Silver

    20.69
    +1.65 (+8.67%)
     
  • EUR/USD

    0.9811
    +0.0010 (+0.10%)
     
  • 10-Yr Bond

    3.6510
    -0.1530 (-4.02%)
     
  • GBP/USD

    1.1304
    +0.0138 (+1.23%)
     
  • USD/JPY

    144.7800
    +0.0510 (+0.04%)
     
  • BTC-USD

    19,562.47
    +257.79 (+1.34%)
     
  • CMC Crypto 200

    444.24
    +8.88 (+2.04%)
     
  • FTSE 100

    6,908.76
    +14.95 (+0.22%)
     
  • Nikkei 225

    26,215.79
    +278.58 (+1.07%)
     

German Summer of Near-Free Rail Travel Is Almost at an End

·4 min read

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Most Read from Bloomberg

Germany’s three-month experiment with ultra-cheap public transport is leaving many consumers wanting more.

The 9-euro ($9.20) monthly ticket allows travel anywhere on regional trains, trams and buses, an effort to help with a cost-of-living crisis and reduce car use as energy prices soar. It’s proved hugely popular, with train journeys longer than 30 kilometers up 42% compared with 2019. Rail travel to rural tourist hotspots in Germany has almost doubled.

The super-discounted tickets run out at the end of August, and some politicians want it extended in some form. In a Kantar poll last month, almost 80% of respondents supported that idea.

But the man in charge of the country’s finances is reluctant. Christian Lindner drew uproar on Twitter last week when he criticized citizens’ “freebie mentality,” and has argued that such a subsidy can’t be sustainably financed in the long term. The 3-month offer cost the government about 2.5 billion euros.

However, it did help to limit inflation. The German Economic Institute in Cologne estimates that headline price growth would have been some 2 percentage points higher in June if government-administered costs had more closely mirrored overall price increases. The public-transport offer lowered such costs significantly.

“It clearly had disinflationary effects. However, it’s worth questioning whether that money can’t be spent more effectively if it’s about relieving the inflation burden for low-income households, who may benefit more from direct transfers,” said Melinda Fremerey, the author of the institute’s study. “Politicians will need to determine if the tool is about pursuing climate policy or countering inflation.”

Some holiday destinations within Germany seem to have benefitted from an uptick in out-of-town visitors since the introduction of the 9-euro ticket. The Baltic Sea port of Stralsund saw a 43% increase in card transactions month-on-month this July, compared to a 36% increase the previous year, according to data from payment provider Sumup.

Recently there’s also been intense debate over its effect on travel habits. Lindner, who is from the business-friendly FDP party, pointed to arguments that it led mainly to additional leisure travel, with very little reduction in regular car trips, such as commuting. That suggests transport systems faced more pressure as a result of the discount.

A study in Munich found that only 3% of people in the city used their car less after the ticket was introduced, while more than a third said they increased their public transport usage. However, the researchers noted that 22% were taking trains and buses for the first time, which might encourage them to use those options more in future.

Supporters of the measure have argued that increased leisure travel was an obvious outcome due to the summer timing.

Lindner’s Green and Social Democratic coalition partners are pushing to introduce a successor to the ticket after the end of August.

One key reason for extending the offer in some form is that Germany, as with many places, has yet to face the worst of the inflation surge. As winter approaches, people will be spending more heating their homes, and further cuts to Russian gas supplies could push domestic energy costs even higher.

German Transport Minister Volker Wissing, a member of Lindner’s FDP, also would like to see the measure extended.

“With this ticket we managed to have 20% more passengers without changing anything in the service,” he said in Goslar on Thursday. “People are changing their consciousness and changing their behavior, and that’s why we have to change not only in terms of regulation but also in terms of thinking in practice and in terms of having the courage to initiate disruptive change processes.”

The government has two main options: Extend the ticket as it is or wait some time for a modified version, as it would be too late for transport companies to issue an alternative pass for September.

But Lindner favors policies that directly increase disposable income, such as adjusting tax brackets to account for inflation. That could provide more broad-based relief in a country where only one third of the population is regularly served by bus and rail options.

(Updates with transactions data in 7th paragraph)

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.