Impact of euro debt crisis on 50+ investors

Older generation trusts the euro / French and Italians perceive largest negative impact from European debt crisis on their personal financial situation / European majority fear tax hikes and increasing inflation rates

 

One of the major challenges for private investors preparing for retirement is coping with volatile financial markets. Whereas younger investors still have time to adapt and compensate for investment decisions which might not prove favorable or which were influenced by negative market movements, people close to retirement do not have that luxury.

 

Allianz International Pensions conducted a new survey in seven European countries among 1,400 wealthier people between ages 50 and 70. One of the key findings is that although there is a great deal of uncertainty around financial markets and how to invest in the current environment, people in Austria, Germany and Italy largely trust the euro. More scepticism is found in France and in the Netherlands, while the greatest euro scepticism is found in the UK.

 

“In the current situation, investors are well advised to take greater responsibility for adequate investment planning and should ’Rethink Retirement’ – particularly those people close to retirement age,” says Jay Ralph, Chairman of Allianz Asset Management and a member of the Board of Management of Allianz SE.

Jay Ralph: “In the current situation, investors are well advised to take greater responsibility for adequate investment planning and should ’Rethink Retirement’ – particularly those people close to retirement age”
Jay Ralph: “In the current situation, investors are well advised to take greater responsibility for adequate investment planning and should ’Rethink Retirement’ – particularly those people close to retirement age”
Trust in the euro

Question: There is a lot of discussion about the euro crisis in public lately. Do you currently trust in the euro to be a strong currency?

Base: Top 20% of 50-70 year old people regarding investable assets

Impact of the debt crisis on the financial situation

People close to or in their early years of retirement probably thought that they had secured their future and could rest easy, but they instead faced severe market volatility during the last decade. The euro zone debt crisis amplified this uncertainty.

Although it seemed like the financial crisis had already peaked in the middle of 2012 when the president of the European Central Bank, Mario Draghi, released his statement in support of the euro, the on-going impact of low yields and even negative real interest rates have had an impact on retirees’ income expectations. In the current conditions of financial repression, savers get hurt. But to what extent has the crisis already impacted the investment decisions of wealthier people age 50 to 70?

In the new Allianz study, only Germany and Switzerland feel mostly unaffected. In Germany, a majority of 62% say the crisis had not had an impact on their personal financial situation. A similar result can be seen in Switzerland, which is not surprising as it is a non-European Union member, with its own currency and perceived as a safe haven. In contrast, the majority of French and Italian interviewees felt a negative impact on their personal financial situation due to the crisis, while Austrian respondents were split.

The euro crisis has still not been solved, as government debt levels remain excessively high. Approximately 80% of respondents think that there will be tax hikes, and this opinion is more or less equal across all countries of the new survey. The same holds for expected inflation development. Across all countries, the majority of people see inflation increasing – 80% in Germany and the UK and approximately 70% in Austria, France, Switzerland and the Netherlands. This is in contrast to a far smaller majority (56%) of Italians anticipating inflation rates rising.

“Europe's sovereign debt crisis is putting the continent at serious risk of losing its economic and political clout on the world stage.To ensure it does not become marginalized, Europe must find a permanent way out of the current cycle of crisis and rescue,” Ralph concludes.

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Claudia Mohr-Calliet
Allianz SE
Phone +49.89.3800-18797
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