Germany: Land Of Poverty... Or Prosperity?

Tyler Durden's picture

Time after time, it appears, in Europe 'beggars can be choosers'. That is, it seems, until Cyprus when the Merkel hammer was brought down and a new 'template' to avoid German taxpayers implictly taking on the burden of southern European largesse. The initial pro-Euro indifference to the bailouts has turned increasingly to resentment in Germany - and as we noted here, the rise of anti-Euro parties in the very heart of the political project. The following Bloomberg Briefs chart explains the tension and why the German 'five-wise-men' are pushing for a broad-based 'wealth tax' across Europe's periphery.

Simply put, the Germans bearing the burden are 'poorer' than the peripheral nations as the chart of median wealth so clearly indicates. Combine this with the fact that Germany has the lowest rate of home ownership in Europe and it is little wonder that 'Alternative-for-Germany' party is already at a 3% polling?

However, as discussed here, while it may not be reasonable to ask the ‘poor’ median German household to transfer resources to southern European countries, it may be more reasonable to make such demands on the richer part of the German households and the corporate sector. The problem is that this wealth is very unequally distributed in Germany, creating a perception among less wealthy Germans that these transfers are unfair.


Median Net Wealth...


Home Ownership...


It seems just another massively broad disparity in the European disunion...BUT...

Chart: Bloomberg Briefs


But as Paul De Grauwe and Yuemei Ji note from VoxEU,

Are Germans Really Poorer Than Spaniards, Italians, And Greeks?

Rarely have statistics been misused so much for political purposes as when recently the ECB published the results of a survey of household wealth in the Eurozone countries (2013a). From this survey it appeared that the median German household had the lowest wealth of all Eurozone countries. Figure 1 summarises the main results for the most significant Eurozone countries.

Figure 1. Net wealth of median households (1000€)

Source: European Central Bank (2013).

From Figure 1 it appears that not only the median German household has the lowest wealth, but also that the differences within the Eurozone are enormous. The median households in countries like Belgium, Spain and Italy appear to be three to four times wealthier than the median German household. Even the median Greek household is twice as wealthy as the German one.

The publication of these numbers by the ECB quickly led many observers to conclude that it is unacceptable that the poor Germans have to pay for the rescue of the much richer Greeks, Spaniards and Portuguese (see, e.g., Wall Street Journal 2013, Financial Times 2013, Frankfurter Allgemeine 2013).

Is this the right conclusion?

A first thing to note is that the ECB also published the mean net wealth of households in the Eurozone. Surprisingly, the mean household wealth numbers were not given much attention in the media, despite the fact that when compared with the median numbers they provide important information about the distribution of wealth in the different member countries. We show the mean wealth numbers in Figure 2. It is striking to find that the mean household wealth of Germany (approximately €200,000) is not the lowest of the Eurozone anymore.

Figure 2. Mean household net wealth (1000€)

Source: European Central Bank (2013).

A comparison of the median and mean wealth reveals something about the distribution of wealth in each country. If the largest difference is between the mean and the median, the greater is the inequality in the distribution of wealth. It now appears that the difference is highest in Germany. We show this by presenting the ratios of the mean to the median for the different countries in Figure 3. In Germany the mean household wealth is almost four times larger than the median. In most other countries this ratio is between 1.5 and 2. Thus household wealth in Germany is concentrated in the richest households more so than in the other Eurozone countries. Put differently, there is a lot of household wealth in Germany but this is to be found mostly in the top of the wealth distribution.

The inequality of the distribution of household wealth is made even more vivid by comparing the wealth owned by the top 20% of the income class to the wealth owned by the bottom 20% of the income class. This is shown in Figure 4. We find that in Germany the top 20% of the income class has 149 times more wealth than the bottom 20% of the income class. Judged by this criterion, Germany has the most unequal distribution of wealth in the Eurozone.

Figure 3. Mean/median

Source: Own calculations based on European Central Bank (2013).

Figure 4. Wealth top 20% / wealth bottom 20%

Source: European Central Bank (2013b).

Wealth of households and wealth of nations

The next question that arises is whether household wealth is a good indicator of the wealth of a nation. A significant part of a nation’s wealth can be held by the government or the corporate sector and not by the household sector. If the question is to find out how much capacity Germany has to make transfers to other countries, a more comprehensive measure of wealth should be used. Such a more comprehensive measure of wealth is available. This is the total capital stock of a nation. This is a measure of the capacity of a nation to generate (together with human capital) an income stream.

We used available information on the capital stocks in OECD countries and updated this to 2012 (see Appendix for more information). We then computed the net capital stock per capita in the member countries of the Eurozone. We use two definitions. The first one is the domestic capital stock per capita (Figure 5). The second one is the sum of the domestic capital stock and the net international investment position vis-à-vis the rest of the world. We call this the total capital stock per capita (Figure 6). We find strikingly different results when compared with the household wealth figures.2

Figure 5. Domestic capital stock per capita (euro)

Source: authors’ own calculations, Eurostat and Database on Capital Stocks in OECD Countries, Kiel Institute for the World Economy.

Figure 6. Total capital stock per capita (euro)

Source: authors’ own calculations, Eurostat and Database on Capital Stocks in OECD Countries, Kiel Institute for the World Economy.

The most important difference is that the northern Eurozone countries are the wealthiest countries in the Eurozone. This conclusion can be made by looking at the domestic and the total capital stock numbers (Figures 5 and 6). When concentrating on the total capital stock (Figure 6), it appears that Germany belongs to the top two countries in terms of per capita wealth. In contrast the southern European countries have the lowest wealth. Wealth per capita is more than twice as high in northern European countries than in southern countries such as Greece and Portugal.


From this analysis it follows that it is misplaced to conclude from the ECB study that Germany is poor compared to some southern European countries and that therefore it is not reasonable to ask German taxpayers to financially support ‘richer’ southern countries (see e.g. Wall Street Journal 2013). The facts are that Germany is significantly richer than southern Eurozone countries like Spain, Greece and Portugal.

There does seem to be a problem of the distribution of wealth in Germany:

  • First, wealth in Germany is highly concentrated in the upper part of the household-income distribution.
  • Second, a large part of German wealth is not held by households and therefore must be held by the corporate sector or the government.

Thus while it is may not be reasonable to ask the ‘poor’ median German household to transfer resources to southern European countries, it may be more reasonable to make such demands on the richer part of the German households and the corporate sector. Put differently, the opposition in Germany to making transfers to the south finds its origin not in the low wealth of the country. The facts are that Germany is one of the wealthiest countries of the Eurozone. The problem is that this wealth is very unequally distributed in Germany, creating a perception among less wealthy Germans that these transfers are unfair.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LawsofPhysics's picture

Funny, would you like to own property in Solvakia or Germany.  Lean forward bitchez.

slaughterer's picture

Despite financial conservatism that leads them to over-insure themselves and never invest in the stock market, the average wealth in Germany is just comparably small to make this nation a nation of gripers and complainers and rip-off artists.  There is really no hope for this country if it gets to the Armeggedon scenario of Weimar !! as the existing populace is living on tenterhooks above a pit of poverty and existential misery. I would not expect a very supportive community of traders trading gold for services like in the American post-breakdown libertarian version because there is no libertarian and communal spirit here whatsoever--just icy separatism and belly-aching.  The average meal of a Maggi-brand dried soup packet with maybe a Dr. Oetker frozen pizza while watching SAT 2 is just so common and gives you an indication of the subsistence life quality of the durchschnittlicher Deutscher. Maybe punctuate that with a wild vacation in Thailand searching for erotic wonderment or a nice weekend in the Alps, but that is about it  Germany is poor and miserable.  

LawsofPhysics's picture

Traders?  Who gives a shit.  What products of real value does a paper-pusher really produce.  Are there humans still trading real things, yes, but not in any sort of official "market".  What garbarge.  Location matters, it's the same the world over, including Germany.

WayBehind's picture

In Slovakia, they all got their homes from the government for free during the communist years. That being said, very nice country and good place to retire as it is still cheap over there compare to the rest of the Europe.

LawsofPhysics's picture

Some great places in Romania as well. However, you better have a strong local tribe.  All countries, especially these areas have their problems.  Corruption is very much a way of life.  Not so necessarily a bad thing. Sometimes the most "corrupt" locations have the clearest price discovery.

JR's picture

Gripers? slaughterer.  Without the overlords of the German bankers and their connections to the Bank of England and the Fed, the Germans would have been one of the most prosperous, independent beacons of free enterprise economics in history.

It is not funny that they are criticized for trying to survive under the yoke of tyranny and plunder instituted and magnified by one of their most infamous sons, Mayer Amschel Rothschild.

Another German son had a different approach to the world and made a much different contribution. In facing excommunication, Martin Luther sent a treatise to Pope Leo X with two primary propositions:

“A Christian is a perfectly dutiful servant of all, subject to all.”

and then, the clincher, “A Christian is a perfectly free lord of all, subject to none.”

While these two propositions seem to contradict each other, Luther explained, they were both statements by St. Paul and have been a major foundation for Christianity throughout these many years. This is the spirit of freedom that brought the Pilgrims to this land.

Our Founders were not gripers; our Founders were men of action and one can only hope that the Germans will look to their heritage in Martin Luther and not Rothschild to shake off the tyranny that has enslaved them.

And one can only hope that Americans will show their tyrants of 100 years the exit as well.

Ion the Ion's picture

perfectly agree .. except with the part about R being a son - that made me lol.

cnx's picture

And by comparison, the average American's life is so much more ---  intellectual?

Kinskian's picture

Being German is its own reward. We are all ill served by our politicians, but the German people are endowed with greatness.

Ghordius's picture

several US-or-UK-born-and-raised bankers have moved to the German-speaking countries of Germany, Austria and Switzerland and found out that there homeowership is not the norm

usually they first start to moan about how difficult it is to find a home - until they realize that the renting market is simply stupendous

it has to be, it's a major political concern that it stays so

then they usually either stick to the customs of their own nation, hold their noses and buy something either overpriced or smaller-than-expected or they just conform to the local customs

but don't expect them to talk about it - for many it's demeaning to be a... renter - even if it's a 8-room mansion (that often belongs to a pension fund)

those three countries have found out that it's way more economically efficient, and one of the reasons why they are better off in many things

guess what? no "under-water" homeowners that can't even move closer to a new job. oh, and no trillions spent in making "housing affordable for everybody"

just huge, quite efficient renting markets. I remember when 90% of the Swiss rented, now this has dropped to... gasp!... 80%

Totentänzerlied's picture

Feudalism never ended Europe, shocking!

Ghordius's picture

sigh... and what does this mean again? I remember when I had to have several apartments in europe (a special situation, I admit) and I was able to do so at a time where I could not have owned even one of them. for me, it was... freedom

think about it: as a serial/multiple entrepreneur you can keep your capital concentrated in your business, instead of a stupid pile of bricks that actually belongs more to a bank than you

AldousHuxley's picture

and the royal families are still living without being productive.


haves and have nots always exist. upper class will use different justifications (money = merit/market approved, king = god approved, communist leader = people approved) to stay in power which mostly are illgotten or luck.

thisandthat's picture

People being stuck with a house they're still paying for (and will continue for the rest of their working life) is a major obstacle to the so hyped labor flexibility.

Ghordius's picture

just to drive the point (home): most people in D, A & CH that own physical gold & silver keep it... in their rented homes

TheGardener's picture

"to find out how much capacity Germany has to make transfers to other countries"

Making transfers for what ? Having pointed a gun to their heads ? Foreign tanks in the street ? Transfers of loot, patents and Fraulein?

For fucks sake why would they wanted to have any of
their meager wealth being "transferred" ? Daylight
robbery called just a "transfer" , this is insane.

Canucklehead's picture

Why go through all the effort of writing this article, and not include the "Black Market" valuations?  The premise here is that the statistics are misleading.  So, rather than trying to clarify things. the writer goes on to muddy the waters in the hopes that decent people won't know the difference.

Pull up models for the black market in Greece, Cyprus, Italy, et al and then compare them.  Get the real facts.

LawsofPhysics's picture

What can anyone say.  Figures lie and liers figure.

Ghordius's picture

ehmm... Greeks, Cypriots, Italians, Spaniards, Portuguese and Maltese might not appreciate this - actually even Scots don't like prying eyes and analysis of how much of their economy is... underground

Mercury's picture

Germany has the lowest rate of home ownership in Europe

Well half the country was communist not too long ago....

schatzi's picture

So was Slovakia and look at their numbers. Different countries, different housing shemes.

Mercury's picture

Different histories with property rights and rule of law too. Not sure how strong the track record is there.

thisandthat's picture

wrong place sorry - see below

malek's picture

These statistics are completely useless, as they count a house which you still have an 80% mortgage on as "yours".

A Man without Qualities's picture

To give you an idea of the difference between markets, there are places in Germany, on the border with Poland, where Poles who still work in Poland have moved and bought houses in Germany were prices are anything up to HALF as in Poland.  So they cross the border everyday to go to work.  Something's pretty messed up there...

thisandthat's picture

All hail the #1 tool of propagandists: the almighty stats!

Mercury's picture

Math doesn't take sides, it just is.

thisandthat's picture

You just have to make sure use it in the right way...

akarc's picture

Like maybe skewing the statistics in a manner that supports your agenda. Nah, can't be done.

Totentänzerlied's picture

Statistics are not math any more than physics is math. They use math. Poorly, most of the time.

thisandthat's picture

Here's a great example of how stats can be misleading, even if just unintendedly by carelessness in interpreting numbers:

The great myth of homeownership - turns out Portuguese real stats are the almost exact inverse of official stats (ie: 28% real ownership, vs. 73% official numbers).

btw: besides everything else, ZH's comment system also screws up google translate urls, so use this instead for the translation of the above link:

Vashta Nerada's picture

Wealth distribution in Germany is also skewed by the former East Germans versus the former West Germans, but wealth transfers are wrong, no matter who is being asked to transfer theirs.

schatzi's picture

Conclusion: the majority of Germans are poor, but because of fat bastard 1%ers in Germany, it's totally acceptable to demand solidarity from the majority of Germans.


Well, fuck you in the face.

akarc's picture

 "it appears that Germany belongs to the top two countries in terms of per capita wealth."

For a second their I thought the article was talking about the U.S. Oh wait a second, they are. Aren't they?

"Appears" the operative word. I was taught to write that a lot. "It appears that", "It may be", "evidence would suggest"..................

Manufacturing illusions so as not to be held accountable for manufacturing illusions!

A Man without Qualities's picture

A huge proportion of German wealth is held by the owners of the Mittelstands. These companies have 70% of employees and generate 50% of the country's GDP.

Most of these firms are unlisted private companies who's ownership is very closely controlled.  Quite often they are family owned (even through several generations of owners) and shares cannot be sold outside the family.  The net consequence of this is that it has severely restricted how the economic boom has spread amongst the population.  Add to that, inheritance and capital gains taxes are quite low (and the "grey market" value of these private companies helps to keep it down).


Another thing is that the low rate of home ownership means there are a small number of people who own a lot of houses, and I mean a lot.

But what is also very interesting is there is a certain understanding that the owners of capital do not flaunt their wealth, but are expected to be frugal and modest.  What this means is they put their cash in the Landesbanks, who lend the money to the less prudent southern  and east European banks who end up causing a property bubble.




europa's picture

Sadly, the mittelstand are zombies, supported by the bust landesbanks which have provided the funds to allow these 'business owners' to overpay themselves and meet the payroll.

There is no capitalism in Germany - just National Socialism, which once again, Germany expects the rest of Europe to pay for.

slaughterer's picture

Most German Mittelstand businesses are dying off right now: their business concepts have no validity int he 21st century.

A Man without Qualities's picture

Do you have any evidence to support that claim?

Ghordius's picture

the German Mittelstand is not only a German thing, it's a widespread business model in the whole eurozone

reading your lines pushed me to give you a +1 for even knowing about it, but reading them gives me the impression you are describing a disease instead of the bloody alternative to the damn megacorporations of the UK/US business model

those SMEs keep jobs and manufacturing here, instead of shipping them East, for example. think about that

of course financial markets either ignore or hate the SMEs, than they generate no business for megabanks

A Man without Qualities's picture

You get me wrong - I am supportive of the Mittelstand concept, and I think it has had a lot to do with the success of the German economy.  The attitude of the owners, the good relations they keep with unions, the willingness to keep investing in the business, all is very healthy.  In bad years, the owners pay themselves less, or nothing rather than fire workers.

But what is true is that it means in Germany, there are is a large number of enormously wealthy industrial families, and it skews the mean wealth as much as the low level of home ownership.

And yes, the banks hate them because they can't sell them anything out of their bag of tricks.

By way of disclosure, my wife's family owns one of them.

Ghordius's picture

it's not as if they would not pay an humungus amount of taxes, isn't it?

btw, nice nick

TheGardener's picture

"The attitude of the owners, the good relations they keep with unions,"

Good relations with their workers, not unions, if I may correct you. Which is changing since the old benevolent
owners failed to raise successors so hired managers are
increasingly spoiling the game.

Roandavid's picture

It is unfair, and patently studpid to transfer German wealth to the south, regardless of where is originates.  What might ..... might ..... be more fair and somewhat less stupid would be to distribute some wealth from wealthy Germans and corporations to poorer Germans, the problem there as we all know is that they just might end up becoming the next California ..... without the climate, or as we call it here in America ..... Illinois.

akarc's picture

"It is unfair, and patently studpid to transfer German wealth to the south, regardless of where is originates.  What might ..... might ..... be more fair and somewhat less stupid would be to distribute some wealth from wealthy Germans and corporations to poorer Germans,"

Kinda like when the fed gives money to Europe, or the corporations give jobs to China, or when the government sends welfare to Africa and numerous other countries.

Or maybe, just maybe when the government gives welfare to the banks and corporations so they can send money and jobs overseas. 

God it all makes sense now.

Yen Cross's picture

     Nice engulfing outside close on the dxy daily chart. Need moar euros to buy moar worthless PIIGS bonds.


CheapBastard's picture



LANSING, Mich. (AP) -- Automatic federal budget cuts will cost Michigan $150 million in funding for programs such as special education and a clothing allowance for needy kids, but none of state government's 48,000 employees will lose their jobs, the state announced Monday