The FINANCIAL — The global gross financial assets of private households grew by 8.1% in 2012, according to "Global Wealth Report", by Allianz.
This is the strongest growth seen in six years and is also well ahead of the long-term average after adjustments for exchange rate effects (2001 through 2012) of 4.6% a year. One of the main factors driving growth last year was the positive trend on the stock markets: assets held in securities swelled by 10.4%. This brought total global financial assets up to a new record level of EUR 111 trillion, according to Allianz.
At the same time, debt growth (including mortgage debt) remained subdued at 2.9% in 2012, the fourth year after the Lehman collapse. The global debt ratio (liabilities expressed as a percentage of GDP) dropped by another percentage point to 65.9%, compared with 71.6% in 2009. This meant that global net financial assets (gross financial assets less liabilities) actually witnessed double-digit growth of 10.4%. All regions benefited from this strong growth. Even in the crisis-ridden eurozone, net financial assets climbed by 7.2% – not least thanks to stagnating liabilities – putting them back above the pre-crisis value for the first time at the end of 2012, according to Allianz.
But the positive development seen last year is not enough to paper over the deep cracks in private asset balance sheets in the euro area. The wealth gap is getting wider and wider. Average net financial assets in Greece now come in at only 28% of the eurozone average; before the crisis hit, this figure was still well above the 50% mark. In Spain, the figure slipped from 61% to 44% last year, according to Allianz.
"The growing wealth gap in the eurozone is an upshot of the crisis," said Michael Heise, Chief Economist at Allianz. "If this gap between north and south widens further it could undermine European cohesion. The reform drives to date are starting to bear fruit this year. Further resolute steps towards integration are needed in order to give all Europeans a clear prospect of growth and prosperity again," he added.
Asset development in Germany was extremely solid last year, with gross financial assets up by 4.9% and net financial assets growing by 6.8%. This puts Germany in the middle of the European rankings. A longer-term analysis casts Germany's development in a much better light: thanks to strict debt abstinence, net per capita financial assets were almost 18% higher than they were before the crisis by the end of 2012 – this growth rate is unrivalled by any other major EMU country; the only other countries to achieve double-digit growth during this period were the Netherlands and Austria.
In a global comparison, however, German was still stuck in 17th place on the list of the richest countries, with average net per capita financial assets totaling EUR 41,950 at the end of 2012. The gap separating it from nations like France and Italy, which are (even) better placed, however, has narrowed considerably. "Germany's savers have weathered the crisis fairly well to date," said Heise. "The high propensity to save, coupled with healthy earnings growth, has so far managed to offset the steep drop in interest rates. But there is no room for complacency, Germany’s midfield ranking is nothing to be proud of. The topic of long-term asset accumulation belongs on the political agenda, particularly given the looming demographic change,” Heise added.
Germany's relatively good performance and the strong development seen last year should not, however, tempt us to conclude that the extremely low interest rates are having no impact on asset development at all. The very opposite is the case, as the analysis of savings behavior in the US and the euro area shows. Savers have adopted a marked preference for liquidity in recent years: the slice of the financial asset accumulation cake consisting of bank deposits has become much bigger in the years marred by the crisis. Over the past five years, banks were on the receiving end of more than half of "fresh" savings funds in the eurozone on average, and as much as two-thirds of these funds in the US. The tendency to shy away from long-term investments, which offer a reasonable risk/return profile, only exacerbates the long-term implications of the low interest rates as far as asset accumulation is concerned.
As a result, financial asset growth is almost starting to resemble Japan, at least in a longer-term analysis: since the Lehman collapse, the average growth in gross per capita financial assets has come in at 0% (Japan), 0.1% (US) and 1.1% (euro area); in the comparable period before the crisis, by contrast, the range still stretched from 1.6% in Japan to 10.3% in the US. Asset distribution is also suffering as a result of the crisis and the low interest rates. In the US and the eurozone, the number of members of the global high wealth class has declined in both absolute and relative (proportion of the total population) terms; in Japan, the figures have stagnated. On the other hand, there are more people sitting in the low wealth segment in all three regions today: this segment makes up 30% of the population in both the eurozone and the US, and around 10% in Japan. The marked disparities in wealth in the US and the eurozone raise concerns that cracks in the social fabric due to the zero interest rate policy will become much faster evident in these regions than in Japan, which is still fairly egalitarian. "The final bill for the low interest rate policy will not hit home until further down the road," commented Heise.
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