A European Central Bank (ECB) survey has revealed that wealth inequality was rapidly increasing in Europe. According to the report, the top 5 percent of European households own 37.8 percent of net wealth in 2014 which was an increase of 37.2 percent since the last survey in 2010. The survey showed that the bottom 5 percent owned only debt.
The inequality is visible in the disparity in wealth distribution. The most affluent 10 percent had a net wealth of 496,000 euros while the poorest 5 percent recorded negative net wealth as the value of their liabilities wiped out all assets. The lowest 10 percent had 1,000 euros or less.
The median household wealth in 2014 was recorded to be 104,100 euros ($108,800), 10 percent lower than what was seen in 2010. The ECB said this was largely due to the fall in housing prices. The decline in wealth was sharper for poorer households than the richer ones. The decline in property prices is a fallout of the economic slowdown in the euro zone and has hurt the poorer sections more. The poorest 40 percent saw a decline of 20 percent in real estate wealth which was double the decline affecting the richest 20 percent.
In a statement the ECB said
The fall in net wealth was mainly driven by a reduction in the value of assets, in particular real estate. The decline in net wealth was higher for leveraged households, especially homeowners with a mortgage, compared with outright homeowners and renters
Those owning houses had net assets of 226,700 euros while those with mortgages had 144,300 euros. Renters were at the lowest end with 8,900 euros. Those having mortgages were also hit by their debt worsening due to reduced real estate value – their net worth dropped by 20 percent.
The ECB noted that the change in income was significant in Greece and Cyprus where median income dropped by around 40 percent. Italy, Spain and Portugal witnessed a decline of over 15 percent. Countries which saw a growth in income were few and the largest increase was in Germany where it grew by 10 percent. Other countries which have seen an income growth were Austria, Luxembourg, and Finland.
Self-employed workers were seen to be the wealthiest with median net assets of 256,100 euros. Older residents were typically richer with wealth rising till the age group of 65-74, before declining. The findings are based on 84,000 interviews conducted in 18 euro zone countries. The results are likely to further fuel allegations that ECB’s policies are worsening inequality in the region.
