Who really believes that Germany is poorer than Spain or Cyprus? The European Central Bank does
WHO really believes that Germany is poorer than Spain or Cyprus? Well, apparently, the European Central Bank does. Which sounds insane but bear with me. They’ve just released some research showing that German households are in fact poorer than households in Spain or Cyprus. The report is here. In the FT we get the following:
Measured in terms of the median, German households occupy the last place among all eurozone countries, with net wealth of a mere €51,000, while the median Cypriot household has net wealth of €267,000. The explanation for this gap is the low property ownership rate in Germany – well under 50 per cent. This means that the median German does not own a house, while the median Cypriot or Spaniard does.
The median is the statistic to quote when you want to say that your typical German is poorer than your typical Spaniard. But that is a meaningless statement because it is based on distributions within countries. If you want to compare across countries, it is better to take the mean. The gap is not quite as dramatic but it is still very large.
If mean German net wealth is €200,000 per household and mean Spanish net wealth is €300,000.
This is, of course, entire nonsense. It is what the report says, but it’s still nonsense.
The reason is that the report doesn’t bother to include pensions as wealth. Which is crazed lunacy quite frankly. Because pensions are the major form of household wealth. Even just the UK old age pension has a “wealth value” of around £150,000. Because that’s the amount of money you would need to buy an annuity which gave you the same income. And the report manages not only to exclude state pensions but also occupational pensions: the way that some 50% of German saves for their pension.
So what we’ve actually got is a report that says German households are poorer than Spoanish or Cypriot ones: they manage this by not counting most of the wealth of German households. Which is insane of course: and it’s the bloody ECB as well. Aren’t we lucky to be ruled by such people?
Photo: A defaced picture of German Chancellor Angela Merkel goes up in flames during an anti-bailout protest outside of the Cyprus’ parliament in Nicosia, Thursday, April 4, 2013. Bank employees in Cyprus will walk off the job for two hours and march toward parliament to protest against looming job and benefit cuts being taken as part of an international bailout. Thousand of employees from across the country are expected to be bussed in for Thursday’s demonstration.