In December 2006, the ECB established the HFSC network of survey specialists, statisticians, and economists from its own ranks, national central banks of the Eurozone, and statistical institutes. The acronym stood for Household Finance and Consumption Survey. It would collect “micro-level structural information” on household wealth. A massive bureaucratic undertaking. Surveys went out in 2010. Results are now ready. No one in Europe had ever done a survey on that scale before. And no one might ever do it again. Because, in the era of bailouts and wealth-transfers, the results are so explosive that the Bundesbank is keeping its report secret—and word has leaked out why.
The surveys were conducted on a national basis, with each central bank publishing its own report. They would then be combined and summarized by the ECB into a cohesive picture of how wealthy—or how poor—people in various parts of the Eurozone were. A number of countries already published their reports, including Italy and Austria.
What the Austrian National Bank found was not pretty (20-page PDF). The considerable wealth in Austria was very unevenly distributed. The wealthiest 5% owned nearly half of the country’s wealth. Their median wealth was €1.7 million in diversified assets. The lower 50% owned only 4% of the country’s wealth. Of them, 83% rented their homes. Their median wealth was a measly €11,000 consisting usually of a car and a savings account. That’s half of the people! And 10% had a net wealth of less than €1,000.
This unequal distribution of wealth created a huge gap between median wealth of €76,000 (half the people had more, the other half less) and average wealth of €265,000 (pushed up by a small number of extremely wealthy households). And that’s why some countries don’t even publish average wealth values. Too much truth would hurt.
Germany’s data is likely to be similar—but the Bundesbank is treating its report like a secret. Because the results are, let’s say, awkward for two reasons. The highly unequal distribution of wealth is one of them. The German government already went through wild gyrations late last year, and now again, over its Poverty Report that exposed some inconvenient facts that were then edited out—something that was leaked immediately, and it caused a ruckus.
Italy is the other issue. But it may be too hot for the Bundesbank to touch. Italy’s report (142-page PDF) finds that median household net wealth has increased 56% since 1991. And from 2008 to 2010, it increased by about 5% annually, despite the crisis!
But the wealth of German households stagnated during much of that time while they paid taxes out of their noses. And now they might learn that Italy’s median household wealth is €163,875—while Germany’s is closer to Austria’s, around €76,000. Less than half!
“Politically explosive,” sources at the Bundesbank whispered to the FAZ.
These reports show that in some countries, like Italy, where government finances have been in crisis, median household wealth is actually greater than in some financially healthy countries where governments have kept deficits and debts down.
Germany’s federal government only had a minuscule deficit in 2012. But high taxes and the citizens’ greater willingness to pay them—though cheating is a national sport—have over the years extracted a lot of wealth from the people and transferred it to the government. In Italy, people have been more adept at hanging on to their wealth. To the detriment of government finances. Other studies have shown similar trends, but never on such a scale with such detail, and in this “harmonized” and easily comparable manner.
It could stir up a firestorm in Germany. It’s not just jealousy. Strung-out German taxpayers would have to be bamboozled into bailing out the mountain of Italian government debt that the Italians, whose median wealth is twice that of Germans, refused to pay for. It won’t sit well. Not at all. It could become a political nightmare for Chancellor Angela Merkel, who faces an election in a few months and must keep any kind of tumult out of the scenery.
If the report ever sees the light of the day in unvarnished form—not a certainty given the debacle of the Poverty Report—Bundesbank statisticians will be trying to explain away the difference between countries like Italy and Germany. Household wealth is particularly high in countries with high homeownership rates, they will argue. In countries where renting is popular, like Germany, a considerable part of the housing stock is owned by the government and rented out in a subsidized manner. Thus the wealth is public, etc. etc. Because the bailout saga must go on. The messy reality that Germans can’t afford to bail out their richer neighbors must not be allowed to interfere with the grand and glorious saga of the euro.