RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: LOL: Germans are poor, Italians are frugal: ECB  Tue Apr 09, 2013 11:58 pm | |
| The Italians are the most prudent people in Europe. Spaniards and Greeks are not as bad off as their homelands’ dismal economic statistics would suggest. And pity the Germans. They are poorer than the Cypriots they are helping to bail out.
Taken at face value, those are some of the surprising findings of an extensive survey of household debt and wealth conducted by researchers for the European Central Bank and published Tuesday.
But the survey, designed to promote better monetary policy by filling a significant gap in knowledge about household finances in the euro area, came laden with caveats. Much of the data are several years old and it could be risky to draw too many conclusions.
For example, the data may make some countries appear richer than they really are, the study warned, because of differences in the number of people typically sharing a home and other factors. Cypriots have some of the largest households in the euro area, while Germans, on average, have the smallest. The survey of 62,000 households measured wealth, income and debt for households, not individuals, so a country with larger families living together might appear wealthier.
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As a result, the figures should be ‘‘interpreted with caution,’’ the report said.
In addition, fewer than half of German households own their homes, in part because it is one of the few countries in the eurozone that does not grant a tax deduction for mortgage interest payments. Because homes tend to be Europeans’ most valuable asset by far, the prevalence of renters makes Germans appear to have less net wealth than otherwise hard-pressed Spaniards. The rate of home ownership in Spain is more than 80 percent.
The average net wealth of households in Spain is 291,000 euros, or $380,000, compared with 195,000 euros for Germany. But it would be hard to argue that Spain, with official unemployment of 26 percent, is better off than Germany, with a rate of 5.4 percent.
And despite average net wealth of 671,000 euros per household, few would envy the Cypriots, whose banking system is in ruins and where the economy may be headed into severe recession. Wealth in Cyprus is also concentrated among a relatively small group.
Interviewers began collecting the data as early as 2009, so they do not capture most of the severe economic decline that has taken place since then in countries like Greece, Spain and Portugal. In addition, survey participants were asked to estimate the value of their homes and might not have been accurate in countries like Spain, where real estate values have declined drastically. The survey contains no data for two of the 17 members of the currency union: Ireland and Estonia.
But the survey does suggest that differences in standards of living in the euro area may not be as great as they are often assumed to be.
The survey challenges some other stereotypes as well. Although the Italian government suffers from a reputation for frivolous spending and dysfunctional politics, Italian households are the least likely in the eurozone to borrow money. About 75 percent of Italian households have no debt at all, according to the survey.
The survey could also fuel the sense of injustice among European policymakers when criticized by their American counterparts about their handling of the debt crisis. According to the data, Americans are the ones with too much debt. In the euro area, 44 percent of households have some kind of debt, compared with 75 percent in the United States. In addition, Americans as a group devote a much larger share of their income to paying interest on debt.
The central bank said in a statement that the data would provide a more nuanced view of household finances and promote better monetary policy. For example, the central bank will be able to better calculate the effect of an increase in interest rates on household finances.
‘‘The ongoing and long-lasting economic crisis has made it more evident than ever that large structural imbalances may remain hidden’’ without such detailed data, the central bank said.
http://www.smh.com.au/business/world-business/germans-are-poor-italians-are-frugal-ecb-20130410-2hk5v.html |
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