Europe's Poorest? Look North

ECB Survey Puts Southerners on Top in Household Wealth, Germans Near Bottom

By BRIAN BLACKSTONE and NINA KOEPPEN

German households are among the poorest—on paper, at least—in the euro zone, according to a study by the European Central Bank that adds a new twist to the debate over how far taxpayers in Northern Europe should go to support weaker countries.

The ECB's findings, released Tuesday, don't give the full picture of a society's living standards, which are affected by things like social protection and infrastructure as well. It also is based primarily on data from 2009 and 2010—early days in the still-festering euro crisis.

Most significantly, the report doesn't adjust for differing rates of homeownership, which is particularly low in Germany.

Nevertheless, the report offers a reminder that citizens in some of the countries hardest-hit by Europe's debt crisis aren't as bad off as many believe.

The question of how much taxpayer money should be put up to bail out governments in Greece, Cyprus and Portugal tops the political agenda in Germany, Europe's biggest economy and financial backer.

The ECB's findings could encourage efforts to further involve the private sector in any future government rescues by imposing wealth taxes or losses on large bank deposits, which would reduce the price tag for Germany and others, analysts said.

The figures "clearly give more weight for bail-ins" of the private sector in countries that need assistance, said Carsten Brzeski, an economist at ING Bank in Brussels.

The report, compiled through a survey of over 60,000 households across the euro zone, shows a dichotomy between cash-strapped governments and a rich citizenry, as high private-sector wealth didn't prevent governments in Southern Europe from racking up large debts.

By one ECB measure of typical households, Germany is the poorest country in the euro bloc, behind even Slovakia and Portugal. A number of factors appear to have skewed the results, such as the emphasis on homeownership, household size and small-business ownership that favors countries in Southern Europe.

 Income-based measures of well-being put Germany on stronger footing compared with its southern peers.

Figures released by the European Statistics Agency last month, for example, showed gross domestic product per person—a measure of income—in Germany was €29,000, or 119% of the EU average during 2010.

That compared with 87% in Greece, 101% in Italy and 99% in Spain. Of the 41 regions with a GDP per capita above 125% of the average, eight were in Germany.

Not surprisingly, households in Luxembourg topped the ECB study, with average net wealth of over €700,000 in 2010, the last year for which data are available.

But those in Cyprus were second, with average net wealth of around €670,000. Last month, the government there got a €10 billion ($13 billion) rescue from the European Union and International Monetary Fund. As part of that bailout, large depositors in the biggest Cypriot banks face significant losses.

German households had on average just under €200,000 in net wealth. The figure was slightly lower in Finland and the Netherlands, where public opposition to bailouts of Southern Europe also runs high.

The median, or midpoint, of German households had just over €50,000 in wealth, the lowest in the euro zone. The median in Greece, was twice that, at €102,000, and five times as high as in Cyprus at nearly €270,000.

Median figures strip out the extremes of wealth and poverty, and are a better reflection of a typical, middle-class household.

There are additional factors, however, that inflated asset valuations in Southern Europe.

In Germany, mortgage interest isn't treated as favorably for taxes as it is in other parts of Europe. In addition, German banks typically require large down payments, depressing home-buying in favor of renting.

"The role of homeownership is sizable," the ECB said in its 113-page report.

The survey data also don't reflect the decline in the prices of homes and other assets over the past three years. Respondents estimated the value of their homes for the survey, so prices may have differed from the actual market value. Households are typically larger in Southern Europe than in Germany, an added boost to their assets.

And the report also doesn't fully incorporate certain pay-as-you-go pension programs that are typically used in Germany.

Still, the report was the ECB's first attempt to provide comparable wealth statistics across the 17-member euro zone. It defined wealth as total assets—including real estate, vehicles, bank deposits, investments and pensions—minus liabilities such as outstanding mortgages, credit-card debt and other loans.