Bundesbank warns inequality is rising in Germany | Business| Economy and finance news from a German perspective | DW | 21.03.2016
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Bundesbank warns inequality is rising in Germany

Germany's central bank has reported that the wealthy are prospering most from low interest rates and easy access to cash. The bottom half of households have meanwhile gotten by with less of Germany's total wealth.

The Bundesbank, Germany's central bank, has published a study comparing the country's income in 2014 with that of 2010, reporting that a rise in average income has not necessarily benefited the average German.

"Private households and their finances," as the report is named, relays two main findings.

First, risk taking as of late hasn't been so risky. Homeowners and shareholders have enjoyed a rise overall in the worth of their investments since 2010.

On the other hand, households with fewer assets have much less to rejoice about. "Net wealth in Germany continues to be distributed unequally," said Tobias Schmidt, who supervised the study.

Wealth on the rise

Average net household wealth rose to 214,000 euros ($241,000) in 2014, compared with 195,000 euros in 2010.

The study pointed to the results of policies pursued by the European Central Bank (ECB) as a factor behind the growth. Cheap money released from central bank reserves has bolstered stock market and low interest rates mandated by the ECB have propelled housing prices.

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According to Schmidt, the researchers found "a strong correlation between property ownership and wealth." Though they could not ascertain "whether the rich are buying more property or property is making the rich richer."

In recent months, the European Central Bank (ECB) has combated fears of inflation in the eurozone with an expansionary monetary policy, frustrating the keepers of Germany's notorious fiscal restraint.

Inequality on the rise

In its argument in favor of reserve, the Bundesbank can now point to numbers indicating a recent growth in inequality.

The boost in average net wealth was not matched by as enthusiastic an increase in median net wealth, which rose to 60,400 euros from 51,400 euros. This means that fewer households than before - almost three-quarters of the total - possess assets worth less than the average.

Furthermore, the study found that the richest 10 percent in Germany tallies an average wealth of over eight times the median, holding 59.8 percent of net wealth, a 0.6 percent increase from 2010. The poorest half of households make do with only 2.5 percent.

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These numbers reveal German households to be more unequal than other European countries. For instance, the difference between average and median household wealth in 2014 in Italy was less stark: a 218,000-euro-average compared with a 138,000-euro median.

In addition, Germany's east was found to have made little progress towards closing the wealth gap with the west. Both sides grew, according to the study, though median net income in the five former states of the German Democratic Republic, plus Berlin, stands at a modest 24,800 euros. The west's median is 80,000 euros.

The researchers point to relatively less property ownership and core capital in the east as a reason for its lagging growth in wealth.

The Bundesbank will conduct a similar study again in 2017, hoping to track longer-term trends.

jtm/hg (dpa, Bundesbank)

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