New money is making its mark

Sixteen regional currencies have sprung up in Germany as alternatives to the euro, to encourage people to shop locally, writes Derek Scallyin Berlin.

To the untrained eye, the middle-aged woman is trying to buy groceries with funny money. Ask Vera Schmidt, though, and she says she is taking a stand against globalisation. Like a growing number of Germans, she pays for her groceries, her daily cup of coffee and even her haircut not in euro but in an alternative currency, the berliner.

Its aim is not to undermine the euro but to encourage people to shop locally and support neighbourhood retailers rather than chain stores.

"We prevent the flow of money out of the region, to China or Taiwan," says Frank Jansky, spokesman of the recently-created Regional Money Authority. The principle is simple: a customer buys the local currency at a 1:1 exchange rate. They buy their fruit and vegetables in this currency, which is then used by the shop-owner to buy produce from a local supplier.

It comes, then, as little surprise to hear that, like many local currencies, the berliner was established by the city's Green League.

"The stronger the regional economy is, the shorter the transport distances," says Ralf Becker of the Green League. Shorter transport distances mean less environmentally unfriendly exhaust fumes.

The berliner is not a one-off, but one of 16 regional, alternative currencies that have sprung up in recent years.

In Bavaria there's the sterntaler and the chiemgauer, in Hamburg the hansemark and in Karlsruhe the carlo. Another 35 are on the way.

The currencies all look different, are not exchangeable, and have their own rules. Many, for instance, lose a small percentage of their value every month to encourage people to spend the money quickly. The "lost" percentage doesn't go to waste, but is donated to local charities. These charities also benefit from a 5 per cent service charge if the berliners are exchanged back into euro.

Officially, the whole business of Nebengeld - alternative currencies - is forbidden by German law. But the German Bundesbank has decided to treat them more as vouchers than as a euro competitor, as the volume of trade involved is so low.

An estimated €300,000 worth of alternative currencies are in circulation in Germany, compared with the €147 billion worth of euro bank notes and coins issued by the Bundesbank annually.

Out of curiosity, the Bundesbank commissioned its own study into this phenomenon, which was last observed during the 1930s depression.

The Bundesbank study criticised the "depreciation money" concept, saying the economic theory behind it - dating back to the 1920s - was flawed. But the report said the goals of the alternative currencies still had some merit.

"These currencies offer a chance for the holder to demonstratively support the local region and to make a statement against globalisation," the report said.

The berliner is accepted all over the German capital, from web designers in the eastern neighbourhood of Friedrichshain to bicycle shops in alternative Kreuzberg.

"I've never had anyone buy a bike with berliner but people use the currency to pay for repairs," said Konstantin Kühne, owner of Froschrad bicycle shop in Kreuzberg. "I like taking them because I then go around the corner and use them to buy my groceries. I wouldn't go to a big supermarket anyway, but for people who might, this encourages them in the other direction."

Separate studies in Berlin and Bavaria confirm the positive effect on a region, showing the currencies encourage customers to frequent small local shops instead of larger chains and supermarkets. The money also has a higher turnover. One study shows that one chiemgauer is exchanged 20 times a year, compared with 10 times a year for a euro. It seems that Germany's funny money is no joke.