Lies and reality about incomes and wealth in the EU

Participation of László Andor, Member of the European Commission, at the Ninth Round Table on Poverty and Social Exclusion, (EC Audiovisula Services).

Participation of László Andor, Member of the European Commission, at the Ninth Round Table on Poverty and Social Exclusion, (EC Audiovisual Services).

The European Central Bank in April this year produced a statistical paper on the distribution of real household wealth in Eurozone countries. The study argued that in terms of net wealth the average German household appears much poorer than their counterparts in the crisis hit countries of south Europe, that is Greece, Cyprus, Spain, Italy and Portugal. Without saying it this study was obviously aimed at the easy conclusion drawing that Germany should stop helping those unemployment stricken member states and, why not, ask help from them. “Table 4.1. Net wealth by demographic and country characteristics” of this statistical paper indicates that the median net wealth of the German household was in 2010 €51,400 , in Greece €101,900, Italy €173,500, Spain €182,700 and in Cyprus €266,900. The median divides the size of the distribution of the sample in two equal parts.

Who is rich?

This is probably the best way to prove how easy it is to lie with statistics. For one thing southern households have considerably more members than the German ones and understandably more people mean more wealth. Secondly the southern households own their residence, which constitutes their main asset. In 2010 the real estate crisis hadn’t touched the south yet and prices had skyrocketed before plunging. Thirdly, in Germany overall wealth is much more unequally distributed than in the south and the large majority of households holds only a small part of the country’s riches. Private and state entities are by far the largest asset owners.

More than one analyst proved that this statistical analysis of Eurozone household wealth by ECB is false. Their main arguments are two. For one thing had the analysis used total wealth and not household data, then the per capita distribution in the Eurozone would have clearly brought the north European countries on top of the list, with hugely more accumulated wealth of any form than their southern peers. Secondly the median and mean wealth variables are much more diverging in the northern countries than in the south. This is due to the more unjust distribution of wealth among citizens in Germany than in the south. Unjust distribution of existing wealth deprives the vast majority of households from the ability to accumulate more assets than those they received.

What about incomes?

If that is not enough to convince the impartial reader of the hidden intentions of this ECB’s statistical analysis, then take the data that Eurostat, the EU statistical service, published today on the income distribution among the EU member states for 2012. Of course it’s not the first time that the Eurostat publishes income statistics. All those who follow the news on European affairs are well aware that incomes in Germany and the other north European countries were, are, and will continue to be in the foreseeable future much higher than in the south. This is a long and widely established belief and probably the ECB study on wealth tried unsuccessfully to erase it.

Turning now to Eurostat’s first estimates about the income distribution in the Eurozone countries comparisons are telling. Of course it was not only in 2012 that the northern countries had been much wealthier than the south. This was the standard for hundreds of years. Probably the last time that the south was wealthier than the north was when the Roman legions were still in Germany. Now let’s give the floor to Eurostat.

“The highest level of GDP per capita in the EU27 was recorded in Luxembourg with a level of more than two and a half times the EU27 average. Austria, Ireland, the Netherlands and Sweden were around 30% above the average. Denmark, Germany, Belgium and Finland were between 15% and 25% above the average, while the United Kingdom and France were around 10% above.

In Italy and Spain, GDP per capita was just below the EU27 average. Cyprus was around 10% below the average, while Malta, Slovenia, the Czech Republic, Slovakia, Greece and Portugal were between nearly 15% and 25% lower. Lithuania, Estonia, Poland, Hungary and Latvia were between 30% and 40% lower than the average, while Romania and Bulgaria were more than 50% below the average”.

After that there is no point of continuing the demolition of ECB’s study about the wealth distribution in the European Union and the Eurozone. Incomes are generated by wealth and in their turn generate wealth. It’s logically impossible for a low-income family or country to accumulate more wealth than high income recipients.

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Comments

  1. socritik says:

    Nice read.
    German’s are poorer than the rest of the EU (depends on what you call poor, in France we all have lifelong jobs, I have never felt any poorer), and this has to do with the fact that we in southern europe have an economic and budget management culture close to nothing, nada, empty. When a German increases his savings because of lack of trust in the economic environment, the southern european goes and buys stocks at the sight of the first positive GDP figures.
    I just cannot find the moral justification into pushing German’s to consume and spend more. Economically there is none since we are not in a federal system and transfers between countries are required under no European text whatsoever.
    A piece I wrote about asking wrong policy questions and the catastrophic implications the answers imply.
    http://wp.me/p2BLuf-l2

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