French and German savers: The unequal twins

The wealth gap in Europe has widened in the last decade. Household assets have grown faster in the richer countries – above all in the Netherlands – while southern European countries are lagging behind in terms of both wealth levels and growth. Looking at France and Germany, in 2019, per capita financial assets in France were EUR84,320, just above EUR77,310 in Germany. Growth rates since the Great Financial Crisis have also been very similar: +4.3% per year in Germany compared to +4.2% in France. This puts both countries in the midfield in Europe, well ahead of Portugal and Spain but also well behind the Netherlands and Belgium. 

Finland is the exception to the growing divergence: In 2019, it had almost caught up with Italy, reflecting an impressive pace of growth; back in 2009, per capita financial assets of Finnish households were still nearly EUR19,000 below those of Italian ones. 

What is behind these different developments? A key driver of asset growth is the return, i.e. the investment income generated by financial assets and the value gains in the portfolio. There are major differences in returns across Europe. The Netherlands and Finland – the two fastest-growing countries – take the lead by a wide margin; Austria and Germany, on the other hand, are at the bottom, with returns less than half than those of the frontrunners. However, even after deducting inflation, returns remain positive – albeit very meagre: For Austria, the real return on financial assets has averaged at just 0.5% over the last ten year, and the figure is 1.4% for Germany. What is also striking when comparing nominal returns, however, is the large difference of around 150 basis points between Germany and France; the real return in France (3.0%) is more than twice as high as in Germany.


Investment income, mainly interest and dividends, cannot be blamed for low returns. Here the differences are only slight, which is hardly surprising since all European households operate in the same interest rate environment, and the dividend policies of competing European companies are not fundamentally different. In fact, Germany and France show exactly the same return if only investment income is taken into account. Spain and Portugal recorded relatively good performance in this respect mainly because during the euro crisis, banks still paid relatively high interest rates on deposits to secure a cheap and open source of funding. Now, however, there is no longer any sign of this, with interest rates approaching zero everywhere. For example, the average interest rate on all bank deposits in Portugal in 2019 was 0.13%, compared with 0.17% in Austria and 0.16% in Germany. Spanish households receive on average only 0.05% interest on bank deposits. 


Lina Manthey
Allianz SE