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Study on wealth fuels euro crisis debate in Germany

The European Central Bank normally does its best to hold the euro together, but a study it recently issued has created a furor that could do the opposite: drive a wedge in European unity.

world Updated: Apr 17, 2013 01:23 IST

The European Central Bank normally does its best to hold the euro together, but a study it recently issued has created a furor that could do the opposite: drive a wedge in European unity.

Many Germans, egged on by German news media, are upset about the study’s conclusion — never mind how misleading — that they are among the poorest people in Europe, with fewer assets than even the bailed-out Greeks or the hat-in-hand Cypriots.

This week, Der Spiegel, the influential German newsmagazine, summed up the building sense of outrage.

The cover portrayed a man, presumably a Greek, astride a donkey carrying baskets bursting with euros. The headline read “The Poverty Lie — How Europe’s Crisis Countries Are Concealing Their Wealth.”

The reaction of the German media seems to be inflaming the debate about who should pick up the bill for the euro crisis.

The central bank study suggested that countries like Greece that have been receiving handouts in fact have hidden stashes of property wealth.

That finding has not sat well with German taxpayers, who have had to guarantee more than 50 billion euros, or $65 billion, in European bailout money earmarked for Athens.

Many in Germany still have not forgotten that Greek protesters taunted Chancellor Angela Merkel with Nazi symbols last year when she visited Athens.

The Frankfurter Allgemeine, one of Germany’s most respected newspapers, has accused the central bank of withholding the information until after European leaders agreed last month to a bailout for Cyprus. A spokesman for the central bank said that the report was not ready by then.

Potentially lost in the furor is the fact that even the authors of the central bank’s study cautioned that there were many reasons not to take the findings at face value.

The study was based on an exhaustive survey of 62,000 households in 15 of the 17 euro zone countries, which showed that the median net wealth of German households was only half that of Greek households, less than a third of Spanish households and less than one-fifth of Cypriot households.

Much of the gap stemmed from the low rate of homeownership in Germany. In the other countries, real estate was the main source of household wealth.

Some of the data was collected in 2008, well before Spain and Greece were clobbered by plunging real estate prices and soaring unemployment. In addition, households in places like Cyprus tend to have more members than in Germany, skewing the results.

The study showed that German households, rather than scraping by, were actually among Europe’s richest when measured by income rather than the value of homes and other assets.

German median household income, at 32,500 euros, or about $42,500 a year, was more than double that of Portugal, another bailed-out member of the euro zone.

But there were kernels of truth in the survey conclusions — like the assertion that Italians, for example, are land-rich even if their average earnings are low.

With some of Italy’s biggest banks in trouble and the government staggered by a huge debt, the central bank study could increase pressure on Italy and other countries to raise property taxes.

The German economy has already suffered from the financial weakness of its neighbours, its main trading partners. The fact is that many Germans struggle economically.

The survey implicitly challenged the stereotype of rich Germans.