Spaniards richer than Germans? A Bundesbank tale


National Central Banks, by initiative of the European Central Bank, are involved in a wide-ranging project to find out about patterns of wealth in various countries. Normally, economic survey-based research would not look particularly exciting save for buffs, but the publication of some results in the January report of the Bundesbank prompted the media to publish a plethora of comments and interpretations which may turn out to be somewhat sensitive politically.

This is the bombshell: it happens that South Europeans are richer than Central Europeans. Given current strains in the eurozone, this finding could work as a voracious termite into the ramshackle building of solidarity. If  the string of rescues in the eurozone rests on the assumption that a European strong core is permanently on call and ready to shell out whatever amounts are needed, how can we explain to the average German citizen that he or she has, in fact, been throwing a lifeline to wealthier citizens of the periphery?  Welcome grist for the eurosceptics’ mill.

Just a few words on the Spanish part of the story. Are Spanish households actually that rich?

First, when asked about this, German economists–as the reputed historian Dr Abelshauser–don’t hesitate to recall the impact of internal migrations set off by the industrialization process in the Germany of the late 1800’s and how a strong rental market came about–and lasted to this day as an extremely efficient institution. Renting has also proved expedient for a population that, in general, shows a high degree of internal mobility. Spain’s developments were quite different.

Resettling of rural populations in industrial areas was a major source of economic growth in the 1950’s in Spain. In parallel, and as a question of policy, governments invested heavily in subsidized housing and offered tax incentives to buyers. At the same time, by freezing rents and other means, they nipped in the bud the development of a rental market. No wonder that house ownership comes natural, almost as a cultural trait to Spaniards. Almost twice as many Spaniards as Germans own their home and look therefore, richer.

No more than look. It seems that the Spanish survey took place back in 2008, namely, when real estate prices had gone through the roof, a remark made by serious German analysts. Current valuations would be distinctly more sober. And our house owners are also burdened by a long-term mortgage that should obviously be netted out, whichever house valuation, 2008 or current, is chosen.

Second, those surveys take the household as a unit. Now, there are many more one-person households in Germany than in Spain. It makes full sense for the German individual to opt for a rented apartment, while Spanish households–parents, two or three sons, sometimes with an elder in their care–embrace the notion of a permanent residence for the whole family.

Three, German analysts have also been quick to point out a missing link in the Bundesbank study, namely the economic safety-net provided by the system of entitlements. People not familiar with the system may be unaware of the powerful support that, after years of toil and tears, an average household may receive in Germany. Add such estimates and the current set of data would lose much of its pro-South bias: even if Spanish entitlements found their way into the equation, it neither amounts nor certainty could compare to the offer of the Sozialstaat.

Many Spaniards do feel very uneasy about their own entitlements, especially as they constantly hear local politicians squabble about the future sufficiency of the system.

A final question: what is the relevance of these findings in our European context? My knee-jerk reaction is to say none. Let me make myself understood: they are invaluable as a source of economic information, even if still incomplete. But putting numbers to wealth is always a dated operation. One feels much more worried about the current economic flows–whether the country is growing and creating jobs, the trend of its external trade and financial accounts, its debt dynamics.

The danger is there, though,  that certain sectors of opinion may take this chance to call people’s attention to the rough headlines and remind them of how unjust are this world, and the European Monetary Union in particular, when modest German citizens have to put good money after the money that went bad because of Spanish profligacy. This would be pretty unfair for Spaniards whose house is and will remain illiquid for years, as they struggle over time to cope with the financial burden of their mortgage. But there is cause of concern in an electoral year, with two definitely anti-euro parties on the German stump, in search of the moving force of a populist slogan.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

1 Comment on "Spaniards richer than Germans? A Bundesbank tale"

  1. A very, very interesting story

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