Germany:Europe’s poor relation

La Banque centrale européenne vient de rendre public un rapport sur la richesse comparée des peuples de l’Union européenne. il est ressort que les Allemands sont "plus pauvres" que les Slovaques ou les Grecs. La méthode retenue pour arriver à cette conclusion a été critiquée par les experts, car elle fait trop une trop large place au patrimoine par rapport au revenu. Les eurosceptiques et tous ceux qui pensent que l’Allemagne n’a pas à payer pour les pays européens les plus faibles ont fait leurs choux gras de ce rapport, à l’instar de Holger Steltzner dans le Frankfurter Allgemeine Zeitung (traduction de Presseurop).

The data from the European Central Bank contains political dynamite. For the first time, official bodies across Europe have wheeled out representative and methodologically comparable surveys to determine the wealth of European households.

With average household assets of €51,000, Germans turn out to be poorer than Slovaks, only half as rich as Greeks (€102,000) and almost needy in comparison with Luxembourg (€398,000) or Cypriots (€267,000). The distribution of the assets may come as a surprise, but it is hardly a scandal. It merely describes the reality that more and more politicians and media in this country rarely care to take note of, for whatever reason.

What is truly a scandal is that the ECB held back this data until the "rescue" of Cyprus was agreed, which shows just how deeply the ECB itself has stepped into the euro crisis as a political player.

The financial situation does not square with the politically cultivated image of a wealthy Germany that some like to draw. In Brussels one hears time and again that Germany, with its export muscle, has driven southern Europe into a corner of consumption binges and far too much debt. But that’s as false as the fairy tale that Germany has prospered from the monetary union far more than any other Eurozone country.

Eurobonds gather dust

On the contrary, after the euro was brought in, Germany fell back a few ranks in per capita income and growth. It is also true that the former soft currency countries could think of nothing better to do with the greatest of gifts, the euro and the low interest rates, than to get mired even deeper in debt.

Even German politicians are still in denial about that. They want fiscal equalisation throughout the Eurozone and demand more solidarity through Eurobonds. The Germans, French, Dutch, Austrians and Finns, fleeced by their taxmen, would then have to guarantee the sovereign debts of unsound Eurozone countries – yet without being as rich as the Italians, Spaniards, Belgians, Maltese or Cypriots.

Since that would hardly be fair, plans for Eurobonds will hopefully keep gathering dust in drawers in Brussels. However, we cannot be sure they won’t be pulled out again, as the financial situation is being assiduously reinterpreted. The assets across Europe are, supposedly, not comparable, as the real estate values were not entirely assessed in 2010, but partly in 2008. This applies, however, only to Spain.

In addition, the size of households varies. This isn’t true either, though : with just over two persons per household, Germany lies just below the European average of 2.32.

Skewed German wealth

Some want to count the Germans as "rich" thanks to their allegedly lavish pensions. Now, this is peculiar. Since when have assets been generated by a pay-as-you-go system ? The German pensioner or retiree may have a legal claim to a certain amount that could be considered as an "asset", but their pensions must be paid from the current income of today’s workers. This is not comparable to capital accumulation through life insurance, funds or savings accounts. That is why only the latter was taken into account in the European asset comparison, as were houses and apartments (minus debt), cars, jewellery and works of art.

Maybe another bitter truth for Germany in what the statistics have uncovered will wake up those who want to “save” southern Europe even at the price of turning a blind eye to the subject of assets : nowhere in the Eurozone are assets as unequally distributed as in Germany, as shown by the large gap between average and median wealth (that is, there are some Germans who are very wealthy indeed, skewing the statistical distribution). Why ?

As the study concludes, the assets of the average household in Germany are the lowest in the monetary union, as a consequence of reunification and, as well, of the world wars that Germany started. The richest Europeans live in small countries with oversized banking systems – in Luxembourg, Cyprus and Malta. And where wars were not handed down from generation to generation, great fortunes built up, as in Belgium, Spain, Italy, France and the Netherlands.

Real estate ownership anomaly

Interestingly, even households in Slovenia or Slovakia have created more wealth since the fall of the Iron Curtain than households in this country. The answer to the puzzle reveals the great weakness of capital formation in Germany.

In the former Eastern bloc countries, real estate ownership was often transferred at very low cost from the post-communist state to the residents of those apartments and houses, which explains why the percentage of homeowners in those states ranges from 82 to 90 per cent, while in Germany it’s at only 44 per cent.

Most Germans continue to keep their money in a bank at paltry interest rates, even though they are losing money because inflation outstrips the interest rate. Often it would make more sense to put money into residential property. By exercising discipline in saving and spending, many property owners build up their wealth over the long term. Here is where we must start – and that will also help to distribute assets better in Germany as well.