Wolf Richter: A “Politically Explosive” Secret – Italians Are Over Twice As Wealthy As Germans

Yves here. The comparatively low wealth of Germans should come as no surprise. It’s a direct result of German policies to suppress domestic wages, known as the Hartz reforms (see this post for more detail). But as Wolf indicates, that’s not how it will be seen in Germany.

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

In December 2006, the ECB established the HFSC network of survey specialists, statisticians, and economists from its own ranks, national central banks of the Eurozone, and statistical institutes. The acronym stood for Household Finance and Consumption Survey. It would collect “micro-level structural information” on household wealth. A massive bureaucratic undertaking. Surveys went out in 2010. Results are now ready. No one in Europe had ever done a survey on that scale before. And no one might ever do it again. Because, in the era of bailouts and wealth-transfers, the results are so explosive that the Bundesbank is keeping its report secret—and word has leaked out why.

The surveys were conducted on a national basis, with each central bank publishing its own report. They would then be combined and summarized by the ECB into a cohesive picture of how wealthy—or how poor—people in various parts of the Eurozone were. A number of countries already published their reports, including Italy and Austria.

What the Austrian National Bank found was not pretty (20-page PDF). The considerable wealth in Austria was very unevenly distributed. The wealthiest 5% owned nearly half of the country’s wealth. Their median wealth was €1.7 million in diversified assets. The lower 50% owned only 4% of the country’s wealth. Of them, 83% rented their homes. Their median wealth was a measly €11,000 consisting usually of a car and a savings account. That’s half of the people! And 10% had a net wealth of less than €1,000.

This unequal distribution of wealth created a huge gap between median income (half the people earned more, the other half less) of €76,000 and average income of €265,000 (pushed up by a small number of extremely wealthy households). And that’s why some countries don’t even publish average income values. Too much truth would hurt.

Germany’s data is likely to be similar—but the Bundesbank is treating its report like a secret. Because the results are, let’s say, awkward for two reasons. The highly unequal distribution of wealth is one of them. The German government already went through wild gyrations late last year, and now again, over its Poverty Report that exposed some inconvenient facts that were then edited out—something that was leaked immediately, and it caused a ruckus [read…. Censored: Poverty Report in Germany].

Italy is the other issue. But it may be too hot for the Bundesbank to touch. Italy’s report (142-page PDF) finds that median household net wealth has increased 56% since 1991. And from 2008 to 2010, it increased by about 5% annually, despite the crisis!

But the wealth of German households stagnated during much of that time while they paid taxes out of their noses. And now they might learn that Italy’s median household wealth is €163,875—while Germany’s is closer to Austria’s, around €76,000. Less than half!

“Politically explosive,” sources at the Bundesbank whispered to the FAZ.

These reports show that in some countries, like Italy, where government finances have been in crisis, median household wealth is actually greater than in some financially healthy countries where governments have kept deficits and debts down.

Germany’s federal government only had a minuscule deficit in 2012. But high taxes and the citizens’ greater willingness to pay them—though cheating is a national sport—have over the years extracted a lot of wealth from the people and transferred it to the government. In Italy, people have been more adept at hanging on to their wealth. To the detriment of government finances. Other studies have shown similar trends, but never on such a scale with such detail, and in this “harmonized” and easily comparable manner.

It could stir up a firestorm in Germany. It’s not just jealousy. Strung-out German taxpayers would have to be bamboozled into bailing out the mountain of Italian government debt that the Italians, whose median wealth is twice that of Germans, refused to pay for. It won’t sit well. Not at all. It could become a political nightmare for Chancellor Angela Merkel, who faces an election in a few months and must keep any kind of tumult out of the scenery.

If the report ever sees the light of the day in unvarnished form—not a certainty given the debacle of the Poverty Report—Bundesbank statisticians will be trying to explain away the difference between countries like Italy and Germany. Household wealth is particularly high in countries with high homeownership rates, they will argue. In countries where renting is popular, like Germany, a considerable part of the housing stock is owned by the government and rented out in a subsidized manner. Thus the wealth is public, etc. etc. Because the bailout saga must go on. The messy reality that Germans can’t afford to bail out their richer neighbors must not be allowed to interfere with the grand and glorious saga of the euro.

Every country in the Eurozone has its own collection of big fat lies that politicians and eurocrats have served up in order to make the euro and the subsequent bailouts or austerity measures less unappetizing. Here are some from the German point of view….. Ten Big Fat Lies To Keep The Euro Dream Alive

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  1. charles 2

    How much of italians “extra” wealth is money that they owe to themselves ? Debt is only wealth if “someone else” pays for it. Italian debt is €85,000 per household. If one estimates that only half of it is sustainable, that is 42k that you have to remove from the 163k (I am subtracting an average for a median, I know…, but you see what I mean !).
    Adjust to that the fact that property prices are cheaper in Germany than in Italy
    and you will get much closer median wealth I would guess.
    My take is that Germans are not necessarily poorer, they may simply be more realistic about how their balance sheet should be evaluated.

    1. from Mexico


      When are the German exceptionalists going to wake up and smell the coffee?

      German workers = the world’s biggest mullets.

      This report is only the latest of many which show how Germany has sunk into Dante’s nine circles of hell, aka neoliberalism, under the leadership of its communist/fascist Iron Lady. And for all neoliberal regimes, goal #1 is always the same: MURDER LABOR.

      Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined. This is a unique development in Germany-never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years. The key reason for this decline is not higher taxes and social-insurance contributions, as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective. This finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead one to expect higher wage levels. In contrast to the prevailing wage trend, income from self-employment and investment assets has risen sharply in recent years, such that compensation of employees makes up an ever shrinking percentage of national income. Inflation-adjusted compensation of employees as a share of national income reached a historic low of 61% in 2007 and 2008.


        1. from Mexico

          Well that certainly is what those on either exterme of the ideological spectrum – the so-called Bolsheviks (aka socialists or communists) and fascists (aka liberals or neoliberals) – would have one believe. But is it true? There’s a good bit of evidence that it is not, that fascism and communism are mere constructs of realist ontology and syllogistic logic, and have little basis in reality.

          Take the debate amongst the Mexican left, for instance, over whether Hugo Chávez was a communist or fascist. To get an idea of the magnitude of the debate, as well as its content and tenor, just Google “Hugo Chávez facista o communista.”

          Carlos Fuentes, who was one of the deans of the Mexican left, called Chávez “the Mussolini of the tropics.”


          The chavistas retaliated by charging that Fuentes “in his advanced senility had converted into an old gringo” and attempting to brand him as being a part of what they dubbed “the new Latin American right,” Fuentes along with Vargas Llosa, González de Alba, and Teodoro Petkoff, all who the chavistas claim were following in the footsteps of Octavio Paz.


          Fuentes undoubtedly spoke for the majority in Mexico, and indeed probably the majority of Latin America. Chávez is not that popular in most of Latin America, a fact little known in the insular and all-knowing little bubble-world of the American left.

          This poll, for instance, is typical. It shows only 14% of Mexicans, and 33% across all of Latin America, with a favorable impression of Chávez:


          Also, Venuezuela is perceived as not being very democratic. On a scale of 1 to 10, 1 being undeomocratic and 10 being totally democratic, Venezuela ranks a lowly 4.3. For comparison, the average ranking for all Latin American countries is 6.5. Cuba ranks lowest at 3.5.

          So what is one to make of all this, that the vast majority of Latin Americans are stupid, ignorant and/or deceived, and that only the American left and the chavistas have a lock on sure truth? Or that opportunists use words like “liberal” or “socialist” to hide their true intentions behind?

          1. Crazy Horse

            How do you reconcile the perspective you present with the observation by international election observers headed by Jimmy Carter that Venezuela’s election system is the fairest in the world?

            Surely democracy is about the will of the people being expressed, regardless of whether you agree with the policies or personalities of the winners? Or could the opinions held by Americans north and south be the result of being fed a diet of ruling class propaganda?

          2. digi_owl

            Meh, it seems my brain produced a fart. I really need to remind myself that fascism is a grab bag of populist ideas, meaning that it can’t really be nailed down.

            Problem is i guess that it places the struggle on race while communism places it on class. As such, they will happily apply similar means (nationalized means of production, protectionism) but for different reasons.

            By this i mean that fascism will adopt protectionism and nationalized industry to keep the nation&race “pure” of filthy foreign influence, while communists will adopt the same means with the supposed aim to protection workers from exploitation by industry owners (tho in honesty i think Marx was aiming more for work floor democracy than nationalized industry).

          3. from Mexico

            • Crazy Horse says:

            How do you reconcile the perspective you present…

            I’m not presenting any “perspective.” I’m merely citing some evidence that crashes headon with the Manichean constructs popular with much, if not most, of the American left and the American right. The purpose is to challenge the received truths being evangelized by the leading lights of the American left and right, and to get people to think for themselves.

            • Crazy Horse says:

            …with the observation by international election observers headed by Jimmy Carter that Venezuela’s election system is the fairest in the world?

            Surely democracy is about the will of the people being expressed, regardless of whether you agree with the policies or personalities of the winners?

            But are elections the alpha and the omega of democracy? Could what exists in most nations around the world these days, including Venezuela and the US, be what is called polyarchy?

            “Polyarchy” is defined “low intensity democracy” – a form of government that replaces violent coercive control with the type of ideological control (i.e. brainwashing) that Noam Chomsky describes in Manufacturing Consent.


            The author goes on to explain:

            In Promoting Polyarchy, Robinson describes how the CIA, the FBI and other intelligence agencies were pressured to cut back on many of their more repressive covert activities (i.e. covert assassination) as a result of Church committee reforms enacted in the 1970s. This resulted, in 1984, in the creation of the National Endowment for Democracy (NED), which works closely with the CIA and the US Agency for International Development (the USAID is a well-documented conduit for CIA funding), as well as other “democracy manipulating” foundations..

            Since then numerous studies have furnished further examples where these organizations have infiltrated and “channeled” (i.e. co-opted) the genuine mass movements that form naturally in countries dominated by repressive dictators. The goal is to make sure they don’t go too far in demanding economic rights (for example, labor rights or restrictions on foreign investment) that might be detrimental to the interests of multinational corporations.

            Have you ever stopped to wonder why, despite all the angry rhetoric coming from both Chávez and the US, that the intimate commercial relationship between Venezuela and the US (and here I’m talking about the export and import of oil) hasn’t missed so much as a solitary beat? One almost must keep in mind that Mexico is a country where many a populist leader — shrouded in beligerent, anti-US and anti-establishment rhethoric — has been discovered to receive his financial backing from the very people he so vociferously denounces. One must learn to take all the kabuki with a grain of salt.

            • Crazy Horse says:

            Or could the opinions held by Americans north and south be the result of being fed a diet of ruling class propaganda?

            Absolutely. But you must remember that Latin America was the first place where neoliberal governance was implemented, and its people have 40 years of contending with its protean energies, its seeking to re-invent its oppressive self every day through popular culture in order to find new and better ways of turning us into docile victims.

          4. from Mexico

            @ Crazy Horse

            And are we so quick to forget that it was none other than Jimmy Carter who fired the opening salvo of a new class war on the American worker with the appointment of Paul Volcker as Chairman of the Federal Reserve in 1979?

            Sure, Reagan picked up the ball and ran with it, but he surely didn’t get rid of Volcker.

          5. Crazy Horse

            Mexico,several questions remain unexplored in your polemic:
            1- Was the electoral observation commission’s assessment that Venezuela has the fairest electoral system in the world accurate or the product of delusion and ideological blindness?

            2- Was not the state media system controlled by Chavez still a minor portion of the total media in Venezuela? Did not most television and newspapers remain in the hands of the wealthy in alliance with the US? An alliance that had already attempted one coup against the elected government.

            3- Did the majority underclasses make significant advances both politically and economically under Chavez that would make supporters of them for objective reasons? Or do you prefer to play semantic games to define democracy as poligarchy because it elected a leader with a loud mouth who said things that upset people and organized political alliances to countervail US hemispheric dominance?

            4- Is it not the right of citizens in a democracy to make choices, even if those choices lead their nation down the wrong road? And I’m not talking about elections in the USA where the actual policy differences between the two parties are minor and they both serve the same privileged minority. I’m talking about a country where the political parties represent stark differences in class, ideology and policy.
            5- And what the hell do the policies of the Carter presidency 30 years ago have to do with whether or not an international electoral observation committee got its facts right in Venezuela in 2012?

        2. rkka

          They are. In the inter-war period, western statesmen referred to both Hitler and Mussolini as ‘bulwarks against Bolshevism.’

    2. jake chase

      My question is how was this survey conducted. Are residents required to report wealth and for what purpose? Was this done by sampling or other free hand methods? What assets are included?

      In America I would bet that over 90% of the population has no wealth. If they own a house, it’s under water. Retirement accounts? Vaporized in 2008, and any remaining balance parked in cash for the past four plus years. The fortunate among the 90% have jobs and the hope of social security. They have toys and home furnishings acquired on credit. They have cars programmed to fall apart within four or five years. They have ESPN. Oh yes, and they have debt on credit cards and student loans from which they can never escape.

      Give them the chance and more than half would emigrate to Germany and never look back.

      And if this study was leaked it was certainly done on purpose.

      IMHO, being poor in Italy is probably better than being rich anywhere else.

      1. NotTimothyGeithner

        One thing which jumps out to me is at least modern tradition of Italian households with adult children. If they aren’t married they don’t move out. At least this is the story I’ve always heard.

      2. Bart Fargo

        It’s not quite so bad as 90% of Americans today having no wealth once debts are deducted…the real figure is more like 20-25%, according to the Economic Policy Institute:

        “In 2009, roughly 1 in 4 (24.8%) of American households had zero or negative net worth, up from 18.6% in 2007, and 37.1% of households had net worth of less than $12,000, up from 30.0% in 2007. These households are in financial distress or are extremely vulnerable to it. The bottom 20% of households actually had negative net worth in 2009—gains this cohort made in the 1990s and 2000s have eroded steadily.”


      3. CB

        The car I’m driving is a 2000 model with over 200,000 miles. I’s like to get another but I’m probably going to have this another three or four years, at least. Just minimally adequately maintained, most cars will last a very long time.

        My TV finally conked out at 18 years and I hope to have the one that replaced it as long. Washing machine is 12, needs repair but I’m making do without and it still works. Quality can still be had and at reasonable prices. People sometimes buy because they want, not because they need.

        1. Lambert Strether

          I got a fancy new coffee grinder; a German brand, in fact. Used it a year, and then it conked out. So I reverted to my father’s coffee grinder, made of Bakelite, bought in 1964.

          Sometimes it’s not possible to buy good that last (at least at the price).

  2. bmeisen

    Home ownership isn’t a valid measure of personal wealth especially in countries with lending standards that inhibit speculation. Wolf’s suggestion that Austria is at 17% is an eye-opener. Their banks might be asking for more skin.

    The notion that German households “pay taxes through their noses” also needs to be clarified. Income taxes for lower and middle incomes are comparable with the US, and German taxpayers get more bang for the buck (education, infrastructure, services) than victimized Americans. Non-payroll taxes – health insurance and retirement – are higher and again Germans get more bang, a lot more bang.

    2 German taxes are problematic: the solidarity tax transfers wealth to the former DDR. ARguably without it there would be intollerable levels of social unrest among East Germans. With it they have incomes and lifestyles that approach the WEst. Problem is it should end and it hasn’t.

    Then there’s the value-added tax at 19%/7% in Germany and 20%/10% in Italy.

    I am willing to consider Wolf’s suggestion that Italians have more private wealth than Germans, given that Berlusconi worked hard over a decade to defund and dismantle effective government. Education, infrastructure and services suffered particularly. Italian tax collection leaves much to be desired apparently. If the difference is as dramatic as Wolf suggests, I don’t know.

    1. John Firestone

      Taxes and social contributions currently consume more than half an average German salary. (I calculate almost 57% to get 1660 euros net.) If current conditions and arrangements continue, somewhat less than half the 19.8% paid into the retirement insurance will be lost through inflation over 20 years. An average wage earner thus needs to save 10% or so to retire with a halfway comfortable competence: both to overcome that loss and to pay income taxes, again, when he takes his pension.

      With roughly two-thirds gone, there is VAT and other indirect taxes on what’s left.

      Mr. Richter’s characterization that Germans “have paid taxes out of their noses” is fair and accurate.

      1. John Firestone

        Sorry. The retirement insurance recently dropped from 19.8% to 18.9% to reduce a collected surplus. I used 18.9% in my calculations but my fingers apparently didn’t get the message.

      2. bmeisen

        I believe inflation isn’t a danger because German state retirement benefits are not drawn from individual contributions. Benefits are calculated, as in the US, according to years of participation and levels of contribution. Paid benefits more or less reflect actual prices, not the prices that existed while paying in. It’s more of an annuity system than a 401k.

        Furthermore, the German system differs from Social Security in that its benefits calculation includes periods of education/apprenticeship/career training, at least last I checked, i.e. periods in which no or structurally reduced contributions were made. SS’s calculation uses only actual contributions.

    1. the idiot

      The household wealth numbers could be a little inflated because so many under 30’s are living at home.

      1. NotTimothyGeithner

        Even without the economic situation, living at home is a Southern Mediterranean phenomenon, or more accurately, Northern Europeans move out as soon as possible.

  3. Mark P.

    Very interesting, if correct. Thanks to Mr. Richter & Yves for calling this to our attention.

  4. tom

    I can´t comment on the ins and outs of the numbers regarding Italy and Germany. I know as an absolute fact though that people who live on the margins have an uncomparably harder time in Italy than in Germany. There´s hardly any social protection, education is a lot worse, there´s higher crime and insecurity and finally there is something that seems to be very hard to fathom for Anglo-Saxons: that renting is a much better choice than owning an appartment. Let me explain: an Italian can´t marry without an appartment, has to go into debt for it and will have it like a millstone around his neck for the rest of his life. That is according to Italian friends. And that is how it is in most countries in the world.
    In Germany renters have a very high level of protection. Also people who don´t earn enough can get a supplement from the government to halp them pay their rent. And finally the whole thing works in typical cooperative German fashion. Every few years (varying slightly from city to city) there´s a survey which looks at rents as they are at the moment. This survey takes into account the state of the appartment and the location. Then the present level of rent is found out. Afterwards the whole thing is published. Lets say you have an existing contract. Then your landlord is allowed to hike the rent only, if rents of comparable appartments are higher. And then he can raise the level no more than 15% in three years. This system works remarkably well although it doesn´t apply to new contracts. They are freely negotiable but up to a point. If the landlord overdoes it and you are to high above the median rent for a comparable appartment you can refuse to pay rent.
    Sorry, this is a long explanation but I just want to show that things on the ground might look quite differently.
    Italians certainly have much higher rates of home ownership but I sincerely doubt that it translates into a better standard of living.

    1. from Mexico

      tom, your narrative is a nice story and all that good stuff, but at the end of the day it doesn’t change a thing.

      For the stark reality is this: while the German lords of capital are making out like bandits, German workers are getting the shaft.

      1. tom

        The subject is differingly wealth levels between Italy and Germany. That is all. I didn´t say a word about owners of capital and workers.

        1. from Mexico

          • tom says:

          I didn´t say a word about owners of capital and workers.

          Of course you didn’t. The entire purpose of your narrative is to distract attention away from that subject.

          • tom says:

          The subject is differingly wealth levels between Italy and Germany. That is all.

          So exactly what is it that you are arguing, that income has nothing to do with wealth? Lordy, lordy, who can argue with logic like that? Lest I remind you of Yves’ opening comments?

          The comparatively low wealth of Germans should come as no surprise. It’s a direct result of German policies to suppress domestic wages, known as the Hartz reforms (see this post for more detail).

  5. The Dork of Cork.

    Well its actually claims on wealth rather the intrinsic wealth………..I imagine if the Italians started to spend it on stuff they could not buy the stuff.

    You have to imagine Europe as the plantation owners house with different rooms.

    The world is the cotton fields.

    The problems reside in the global cotton fields ……..to free up capital for the cotton fields he has reduced his European domestic servants income.

  6. The Dork of Cork.

    PS Italian oil consumption is now equal to or below Spanish consumption despite Spanish energy consumption tanking and it having 13.5~ million more people on its soil.



    Essentially Italians don’t drink wine anymore so as to hold onto their Gold.

    Ever since the Euro got really going in the early 80s this sort of stuff has been happening.
    People give their surplus labour value to banks which then procede to waste it on global wage / arbitrage games.

    It will continue until it cannot.

    1. Ignacio

      Dork of Cork: please, don’t be so symplistic. It is very well known that Spain is relatively ineficient compared with other large european economies in terms of oil consumed per output unit. This is for several reasons. One reason is demographics: Spain is less densely populated. Another reason is geographic: Spain is larger than Italy and with a difficult orography. Other reasons are socioeconomic. For instance, Spain relies less in manufacturing and more in less fuel efficient sectors like tourism.

      1. The Dork of Cork.

        Italian oil consumption has declined since 1998 ~ …..its a long term thingy and is probably the most dramatic example in western Europe.
        Funny enough it coincides with the stagnation of GDP via the fiscal consoladation under the first Mario rule. .. why is that I wonder ?
        It was once a bigger economy then the UK , now even after the UK depression it is not.
        The second loss of oil consumption under Mario mark II has indeed been far more dramatic.

        Also Italy was never a classic Nation state such as France and to a lesser extent Spain.

        There was no central Moscow to rule them all with lines radiating out to the 4 corners.

        This is simple stuff but it is not a square or circular country …..you may have noticed its a long peninsula with both east and west coasts separated by the Apennines.

        Its not Greece in terms of geographic complexity but in many ways its much harder to service its hinterland then Spain.

        Also Sicily and Sardinia require major ferry operations …..The Balearic Islands less so.

        The guys that run the Euro have always been active in Slave /energy arbitrage operations.

        Its just what they do.

        Nation state interactions reduce their profits.

        General wealth is of no concern to them.

        I should think the dynamics of this is pretty obvious now.

        The euro function is to suck the Marrow from the bones of the corpse ….nothing more.

        Its a wonderful design when looked on from a wide perspective.


        1. The Dork of Cork.

          If we are to get out of this mess we need to reject post war petro efficiency arguments.

          Such as oil consumed per output unit……..

          Or the need to export to afford energy imports………

          This is the classic Amsterdam entrepot way of looking at things….
          Real nation states don’t function like entrepots.

          The entire continent has been forced into becoming a larger lowlands depending on outside inputs for everything with obvious catastrophic results.

          The trouble begins when Belgium losses the Congo…….
          Well Europe is just one large Belgium now and its in the fucking shit.

          1. The Dork of Cork.

            Italy like all other European countries is a entrepot economy with declining import inputs….the worst of all worlds

            The Euro gestation since at least 1980 has prevented Italy and other countries developing local rational commerce to replace external oil & gas inputs.

            It has simply become more efficient at using outside inputs.

            But as any scientist who studies natural ecosystems will tell you efficiency is the opposite of redundancy.

            The Cheetah becomes faster and faster to chase the Gazelle ……but this quest for speed & efficient locomotion reduces body mass , eventually he is unable to defend his meal.


  7. tom

    Hallo Yves. Regarding the Hartz reforms being the cause of the differing wealth levels that is unfortunately hardly possible. They were enacted around 2000 and that is only ten years ago. Wealth formation typically takes much longer than that. Furthermore – sorry to state that – Italy is a country with a huge shadow sector. A large percentage of workers doesn´t have any social protection whatsoever and certainly incomparably less than somebody getting Hartz IV. In fact if you are on Hartz IV you get the rent for free, health insurance plus an allowance of more than 400$ per month for every member of the household. So a family of five will get more than 2000$ plus rent and health insurance. But you must take any job offered otherwise you will lose that money. That has certainly resulted in a lot of pressure and in lowering employment standards. (Before you could refuse a job not of your profession a.s.o) But it is also only a lot of theory in areas with high unemployment like Berlin or the East. There there is simply no work and so you won´t be forced to take anything. And the Hartz reforms have also had no influence on workers on contract. Once you are taken on the work force on a permanent basis all protections still apply.
    I don´t want to deny the efffects of the Harz reforms but the fact remains that Italians, Spaniards and Greeks can only dream of something like Hatz IV.
    Finally the Hartz reforms have mostly impacted a relatively small percentage of the population i.e. mostly the unskilled. Their lot has certainly gotten a lot worse (relatively speaking). But that couldn´t possibly account for the difference in wealth levels between Germany and Italy. I believe that it must be the higher appartment ownership and I wonder, whether it is not due to the fact as well that tax collection is rather spotty in Italy.

    1. PaulArt

      1.It’s o.k to screw a minority of the workers in Germany coz, gosh! they get so much social benefits!
      2. The Hartz reforms are really swell and helped Germany.
      3. Italians are tax scofflaws and that is why they are richer.
      4. Don’t complain about German workers being screwed – look at Spain and Greece! They can only dream of benefits like what we give the German workers.

    2. from Mexico

      Really tom, you go into some of the most unbelievable rhetorical contortions to try to obscure one simple fact: German workers have gotten the shaft.

    3. Lune


      I appreciate your efforts to bring a more nuanced view of the data (and that’s not a euphemism). I’m hardly a German apologist but I too would argue that to really understand comparative wealth levels, you have to adjust for the quality of public goods available. After all, the point of accumulating wealth is to ultimately spend it. And if you get good public services, you need comparatively less private wealth to achieve the same standard of living.

      To take an extreme example. You would need to be a millionaire in Somalia to achieve the standard of living of a poor person in New York. Because just ensuring the same level of safety that an American can take for granted (even with high crime levels in poor areas) means you have to pay for a private army, an armored car, armored escort to go anywhere, etc. Similarly, thanks to public investment in trains, most New Yorkers don’t need even a bike to achieve a higher transportation standard than one achieved with an armored Land Cruiser (needed to navigate both rebels and potholes) in Somalia.

      To take a less extreme example, I’d argue that an American with 2 children and $400,000 in the bank is less wealthy than a German with 2 children and $100,000 in the bank, because that American will eventually need to spend all $400,000 for his kids to get a college education (assuming no grad school), while the German will essentially pay nothing (except of course taxes) for the same service.

      So I agree that any discussion of wealth accumulation must be augmented by an analysis of the public services that are available that don’t need to be paid for by private wealth.

      That said, while this analysis *may* explain the wealth differences between Germany and Italy, it *doesn’t* explain the stagnation of German wages over the past few decades despite increasing productivity and GDP. Assuming that the public services provided by the German welfare state during this time have stayed stable (in both quality and quantity), then a lowered labor share of GDP logically means labor has lost ground. Whether this is because of the Hartz reforms or not can certainly be debated, but the results are very clear.

      Now Germany has had to do something very unusual these past 20 years, namely integrate East Germany, and I don’t know enough about the macro-economic effects of that effort to comment. That, IMHO, might be the only possible non-class-warfare explanation for the stats. Otherwise, I think you do have to conclude that the average German worker has lost ground while the economy has expanded, and this is most likely due to a deliberate political goal to suppress labor and help capital.

      1. gerold k.b. weber

        Not only German wages stagnated. This is globalized capitalism with its pressure on wages in all kinds of ‘developed’ countries. Look at the falling labor share all over Europe in the last 30 years.

    4. Xedef

      Just one minor thing you forgot is that to collect that wonderful welfare money you have to become a ward of the state. The roughly 5 million collecting Hartz4 you call a small minority, have by definition 0 assets. Own a car but got let go from your low wage job? Well you have to sell it before you get any money, doesn’t matter how much you get for it though since you don’t get to keep it anyway. Forget about inheriting anything. Also you have to make all your financial transactions transparent, oh and expect people to come and inspect your apartment every now and then for undue wealth, but make sure you have a good explanation if they don’t find you at home. Truly a paradise everyone surely dreams of, almost like the GDR except you don’t have (to) work. You are now a proud member of the permanent reserve workforce and your only social obligation is to let people spit on you from time to time.

  8. The Dork of Cork.

    To talk of Italy or Germany as real economic hinterlands is a joke…….

    These do not trade each others agri / energy goods…..
    They are not real political / economic units.

    Oil (external energy) just runs through their internal systems from which they produce junk of either high or low quality.

    Germany is perhaps the most extreme large entrepot economy on the planet , Italy now at least has the advantage of just watching the show from the sidelines.

    The function of the EU & the Euro was to standardize societies and thus propel these resources upwards using monetary and social (law) means.

    The problem is of course a catastrophic loss of internal redundancy now reaching absurd levels.

    A monetary black death is coming.
    Its essentially the same event which brought famine and death to late medieval Europe when the Italian banking republics linked vast geographical areas via a form of massive monetary speculation.

    Its the same characters I am afraid.

    Ireland should never have given up it agrarian cattle for coal trade……the post 1957 oil /credit hyperinflation is over.
    We never had monetary sov systems in place but many people had a few fields to fall back on.
    We will lose all of these wealth claims.

    The extra population importation of the Euro years will be seen for what it was in Italy and the more extreme Ireland.

    Just a extraction of domestic labour value for a negative return as these jurisdictions implode from the weight of all the externalties built up to increase “growth”

  9. Jim Haygood

    ‘High taxes and the citizens’ greater willingness to pay them—though cheating is a national sport—have over the years extracted a lot of wealth from the people and transferred it to the government. In Italy, people have been more adept at hanging on to their wealth.’

    This view assumes that government is simply an arms-length third party, to be avoided if possible. But in the modern welfare state, that’s not so. Social benefits (pension, health care, etc.) have a net present value for those entitled to them — that is, if the schemes are soundly financed.

    In Italy, citizens have managed to retain their wealth, but a suitable haircut of their shakily-financed government benefits would add little to their personal balance sheets from that source.

    In principle, Germans should be able to value promised benefits at close to face value. Implicitly, by financing future benefits on a pay-as-you-go basis, Germans have used their government as a collective savings scheme. BUT … taking on obligations to shore up the rest of Europe means that Germany’s sound financing may be compromised, eroding the value of future benefits.

    One can see why the Bundesbank considers the report explosive. It makes all too clear that GERMANS = BAGHOLDERS. And the euro zone is the transfer mechanism that makes it so.

    1. from Mexico

      Jim Haygood says:

      Social benefits (pension, health care, etc.) have a net present value for those entitled to them — that is, if the schemes are soundly financed…

      In principle, Germans should be able to value promised benefits at close to face value. Implicitly, by financing future benefits on a pay-as-you-go basis, Germans have used their government as a collective savings scheme.

      Savings and finance have nothing to do with the reality of fulfilling the promises made to present and future pensioners. The only thing that matters is how much the nation can produce in the future or how much it can steal.

      1. from Mexico

        And stealing always, sooner or later, ends up being about violence and militarism, and not economics and finance as is claimed by the economic liberals and liberal internationalists.

  10. The Dork of Cork.

    If you look at Italian population figures – the euro years are striking , much like Ireland in fact (although we were far more extreme on a per capita basis)

    from the late 70s to 2002 the population remained in the 56 million range , after 2002 and the movement of peoples it shot up to nearly 61 million.


    This must looked at in the context of massive energy consumption declines with oil use back down to where they were in the mid 1960s when the population was only 50 million +.
    The post war population increase was in the context of rising energy densities per person.
    The Euro years population rises (from external sources) was in the very different context of declining energy densities per person.

    This is always ALWAYS the primary signal for colcivilizational collapse.

  11. ddf

    mmmmm…. And I guess all this lending by German banks to Greece, Italy, and Spain didn’t help to build national wealth…

  12. JohnnyGL

    Anyone read this point and think of those charts from the Levy institute about sectoral balances?

    When the government runs a deficit, it adds to private sector wealth levels. When the government runs a surplus, it drains wealth out of the private sector. Italians have a legacy of large deficits (with external sector close to balance), especially during the Craxi years in the ’90s. All that government debt shows up as assets on the private sector’s balance sheet.

    What’s throwing me off is that Germany has been running very large trade surpluses for close to a decade or more after the reuinification spending splurge in the ’90s. So, where are all those external surpluses? We know German household wages haven’t budged, and their debt to income levels haven’t moved much either. But the fact remains that Germany is running a 5% current account surplus right now.


    That means that assets are piling up on SOMEONE’S balance sheet. Perhaps the real scandal is just how much wealth the corporate sector (and hence Germany’s 1%) have stockpiled wealth over the past decade or so. Does anyone have any details on capital flight out of Germany? By definition, they’re investing 5% of GDP abroad each year.

    By the way, if the Germans want to fix this relative wealth issue, they could do it almost overnight. Merkel could just issue checks of about 75k EUR to every German household. Poof!!! Problem fixed, scandal resolved!!!

    1. pebird

      Trade surpluses tend to accumulate wealth in the commercial sector. Government deficits tend to accumulate wealth in the household sector.

  13. TomDor

    I do not know how much this will contribute – VAT are regressive taxes.
    Consumers pay all taxes – no corporation that makes and sells a product pays taxes. Corporations pass taxes through to the government….financiers have been able to capture this pass through obligation easily.
    In the USA the same holds true – If you are a corporation or business, the unit price of product or labor provided includes a price for taxes or avoidance thereof – both usually.
    Bottom line – if wages do not hold-up to unit prices – demand will fall….one would expect unit prices to fall but, these unit prices are being artificially supported by financial intervention- (government and predatory private rent seeking)

    Every extra dollar spent for survival (food, shelter, energy) is one less dollar going to a standard of living. So I guess, the true standard of living is measured beyond just survival means and into community means to provide for each other.

    Debt overhead and it’s companion, debts service in a compound interest economy is killing the ability for people to survive – this leads to instability in the social structure and government structure – war war war.

    In the United States, people are wont to talk feverishly and vindictively about the “non-taxpayer”, for it is here that our brother from Mexico, our cousin from over the Canadian Border, our friends from India and the Middle East come to escape the rigors of their respective locations
    They proceed to use our highways and our libraries, our water systems and our police protection. If they have children old enough and stay long enough, they use our public schools etc., whereupon there is a great cry about non-taxpayers taking advantage of our benefits of government. Because these visitors and temporary residents don’t own property and are not listed with the tax man, the general supposition is that they pay no taxes.
    A itemized account of the money spent by these “guests” over a period of time would yield some surprises. Naturally, the itemization includes practically everything permanent residents would buy, food, clothing, housing, luxuries and the usual necessities.
    A little thought will show clearly that while the guest owned no property here, the hotel proprietor, the restaurateur, the merchant, the grocer, the druggist, everyone in fact, from whom he made purchases did own property, and that property was subject to taxation. The tax on the buildings and merchandize was simply added to the other overhead expenses in the bill of the proprietor and merchant.
    The property owner acted as a collector and ultimate consumer, whether a native son or a wandering guest, paid the tax. The guest who owned no property himself in the United States paid a tax whenever he slept with a roof over his head, paid taxes every time he bought a cigar or steak. A man could no more pass through the United States and purchase a meal or a night’s lodging without paying taxes than he could buy a gallon of gasoline for his car without paying the gasoline tax.
    The “non-taxpayer”? He belongs to the class of griffins and unicorns and other fabulous animals. There is no such creature.

  14. Ignacio

    Very interesting post. I have followed the link and checked that the survey is available only for researchers that have to explain what is their particular research interest. The UE proceeds with it’s obscure, elite-leaded, antidemocratic pursue of whatever they pursue. Distrust is what the EU is achieving in growing amounts.

  15. Abe, NYC

    Much of the Italian household wealth is phantom. Italy has an overvalued currency, Germany an undervalued one. Adjust for this, and the difference doesn’t look so striking.

    Also, even if German public housing stock does not show up as household assets, it’s still there providing utility, and owned collectively. Bailout saga has nothing to do with this fact.

    1. Massinissa

      “Italy has an overvalued currency, Germany an undervalued one”.

      I dont know what you mean here: They both use the Euro.

      1. Abe, NYC

        Exactly: a single currency without banking, fiscal, or political union. Been discussed here a lot, Paul Krugman has written volumes on it.

        Euro exchange rate is a reflection of both Northern strength and Southern weakness. Germany reaps the benefits of cheap currency, which makes it more competitive. The South is suffering under expensive currency because its unit labor costs are too high and it cannot devalue. If Italy leaves the Eurozone, its currency would go down relative to Euro, if Germany does its currency would soar.

  16. Generalfeldmarschall Von Hindenburg

    Germans, French, Italians, Greeks better start showing some solidarity in the face of Finance- hang together or hang separately.

  17. gerold k.b. weber

    What Mr. Richter wrote is well known for some time, and I commented here in several posts on Italian household wealth.

    Thanks to MMT and macroeconomic accounting we also know that in Italy household wealth is just the other side of public debt, and therefore Italy can solve her public debt problems without German or Eurozone help if she likes to do so.

    Spain, Portugal, and of course Greece are different stories, and help for their young and unemployed would be important. Also several Eastern European countries are in a distressed state (look e.g. at the protests against unaffordable high energy prices in Bulgaria).

    By the way: in Austria and Germany less than 50% are home owners, but in Italy (and also in Spain) more than 50%. This HAS to be taken into account when discussing median household wealth. But Italian household wealth is also very high as a pct of GDP, but approximately Eurozone avg in Germany and Austria, and less than avg in Spain.

    Nothing politically explosive here, and some Eurozone politicians (e.g. German finance minister Schäuble) are aware of the situation. And I don’t believe the German wealth survey will be ‘varnished’.

    One of the problems: we have still too many economists in responsible positions who are schooled and believe mainly in marginalist methods. They focus mainly on flows and underestimate the importance of the distribution of financial assets and liabilities (stocks).

  18. The Dork of Cork.

    I don’t understand this wealth thingy ……its claims on wealth is it not ?

    Let me be clear.
    Most Italians live within a Industrial rather then agrarian setting.
    Yet most of their industry has been outsourced so their claims on wealth is external to the Italian political jurisdiction.

    If you live within a Industrial context inside a city rather then a functioning market town or farm (not a tourist trap) with a real local hinterland your lifeblood depends on oil consumption no matter how efficient you can become.

    Let me repeat Italian oil consumption is at the mid 1960s level and falling fast.
    There is nearly 10 million more people living in that country now.

    What is wealth ?

  19. from Mexico

    • Crazy Horse says:

    Mexico,several questions remain unexplored in your polemic:

    No polemic. I’m merely citing some evidence to demonstrate that the world doesn’t operate along the simplistic little lines of good vs. evil, black vs. white, socialist vs. fascist that both extremes of the ideological divide in the United States believe it does. The world is more complicated than that. A lot more complicated.

    • Crazy Horse says:

    1- Was the electoral observation commission’s assessment that Venezuela has the fairest electoral system in the world accurate or the product of delusion and ideological blindness?

    I don’t know. And to set the record straight, remember that I never impugned the vote itself. What I said was that the United States has come to wield “democracy” like a weapon. And you’re the one who invoked Jimmy Carter, not me. That was an extremely poor choice for anyone trying to lend legitimacy to Venezuela’s elections.

    • Crazy Horse says:

    2- Was not the state media system controlled by Chavez still a minor portion of the total media in Venezuela? Did not most television and newspapers remain in the hands of the wealthy in alliance with the US? An alliance that had already attempted one coup against the elected government.

    I’ll resond with this:

    According to a survey revealed on Monday within the framework of the 68th Inter-American Press Association (IAPA) General Assembly, held in Sao Paolo, Brazil, 67% of the journalists in the region that participated in the opinion poll reckoned that press freedom, as a constitutional right, is at risk in the hemisphere.

    The IAPA conducted a survey entitled “Press freedom in the Americas” among 101 journalist or editors in 12 countries of the continent. Based on the findings, 82% of the respondents believe that Venezuela is the country where press freedom is more at risk.


    And this:

    The gradual erosion of press freedom in Venezuela continued in 2010. The media landscape featured political intimidation by government officials and state-owned media in their opinion programs, laws restricting the exercise of basic human rights, systematic judicial and administrative harassment of opposition outlets, economic threats against independent media, and physical attacks against journalists amid a worsening climate of common criminality.

    While freedoms of speech and the press are constitutionally guaranteed, the legal environment is characterized by standing threats of arbitrary detention, charges, fines, and sentences, as well as license manipulation and other administrative harassment aimed at opposition media, primarily broadcast stations and daily newspapers. Defamation is a criminal offense; when directed specifically at the president, it can result in a prison term of up to 30 months.


    There’s much more in that report, since it goes on to flesh out in detail the oppresive environment the media operate within in Venezuela.

    • Crazy Horse says:

    3- Did the majority underclasses make significant advances both politically and economically under Chavez that would make supporters of them for objective reasons? Or do you prefer to play semantic games to define democracy as poligarchy because it elected a leader with a loud mouth who said things that upset people and organized political alliances to countervail US hemispheric dominance?

    Have the underclasses made significant political advances under Chávez? I think that’s highly questionable.

    Have the underclasses made significant economic advances under Chávez? I believe they have made some. But the critics of chavismo allege that the real beneficiary of Venezuela’s fabulous, newfound oil wealth has been the massive and highly corrupt state bureaucracy that Chávez created. One has to remember that Chávez rode the wave of a five-fold increase in the price of oil since 1999 when he came to power.

    If there is a place where Chávez excelled as a leader, it was in, as you say, “organizing political alliances to countervail US hemispheric dominance.” Luiz Inácio Lula da Silva was the hands-down leader in this reagrd, but Chávez ran a close second. If you will notice, all of the leaders of the South American countries who are trying to wiggle out from under US hemony — Argentina, Uruguay, Bolivia, Brazil, Ecuador, etc. — express utmost solidarity with Chávez. This, in my opinion, casts doubt upon Carlos Fuentes’ judgment of Chávez.

    • Crazy Horse says:

    4- Is it not the right of citizens in a democracy to make choices, even if those choices lead their nation down the wrong road? And I’m not talking about elections in the USA where the actual policy differences between the two parties are minor and they both serve the same privileged minority. I’m talking about a country where the political parties represent stark differences in class, ideology and policy.

    The argument is that the differences in class, ideology and policy offered by Chávez are not as starkly different as the chavistas claim they are.

    • Crazy Horse says:

    5- And what the hell do the policies of the Carter presidency 30 years ago have to do with whether or not an international electoral observation committee got its facts right in Venezuela in 2012?

    Because Carter not only fired the first volley in the war on American labor, but he also massively increased military funding. In addition it was Carter’s National Security Adviser, Zbigniew Brzezinski, who set in motion the explosive growth of US clandestine operations around the world — the CIA, DIA, DEA, etc. — which in addition to Asia, Eurasia, and the Middle East brought their murky and highly unprincipled operatiions to Latin America.

  20. ScottS

    This doesn’t play exactly into the Germans’ “blame the Mediterraneans” game?

    “See how lazy and wealthy they are? Ve must cut zem down to size!”

  21. Claudius

    Hmmmm! On its face, Germany has the lowest median net worth (EUR 24,000), followed by the US at EUR 42,000; Italy’s median net worth (EUR 114,000) is much higher than in the other two countries.

    Wolf suggests that wealth is much more unequally distributed in either Germany or the US than in Italy. But, it does raise questions that aren’t easily addressed:

    • What are the other respects in which the ‘wealth portfolios’ differ in these countries?
    • Does the make-up (portfolio) of net worth differ much in the countries?
    • Do these differences exist for all age groups?
    (And, for me, an equally important and compelling assessment of net worth)
    •What are the effects on personal net worth of excluding social benefits in kind?

    Principal residence is the largest component of the wealth portfolio, the variation across age groups is similar to that for total assets. Holdings are smaller for younger

    households and larger for older households. The differences in the value of homes are not large between Italy and Germany. The differences are largest for those aged 55-64, and amount to about EUR 30,000.

    The highest home ownership rate in the US is to be found among older people than is the case in either Italy or Germany. Home ownership rates across the age groups are lower at the bottom of the age distribution and are higher for older households. They are also lower for households past retirement age. This demographic profile is present in all three countries. However, the highest home ownership rates are in the US, and then in Italy. In Germany, they are substantially lower (around 15-20 percentage points) than in the other two countries.

    The ownership rate of financial assets is also high in the US, as it is in Italy (where, interestingly, it is lower for older households). In Germany, the ownership rate of financial assets is much lower than in the other countries and is higher for older households.

    Looking at net worth levels as a function of home ownership rates, the value of the home among homeowners, and the share of households that own their home outright, without a mortgage; in Italy and the US the average home ownership rate is about 70%. The home ownership rate is very low in Germany: less than 50% overall, and is at its peak of 58% among 55-64-year-olds.

    A possible reason for this “skew” is that almost one quarter of the Germany population originate from former communist East Germany – where private property ownership was prohibited, almost (In 1990 Forty-two per cent of housing was privately owned, though in most cases, individuals owned only the structure; the state owned the ground; additionally, under the Land Reform act of 1947, plots greater than 10,000 acres, were confiscated by the state) Reunification occurred in 1990 – it’s been less than one generation since these citizens have been able to either secure home ownership through completing a mortgage term, inheritance or direct purchase. Which, (According to the Paris-based Organization for Economic Co-operation and Development) has resulted in house prices increasing by an average of 83% between 1970 and 2008 in OECD countries, but in Germany, they fell 17% (throughout the decade prior to 2008 – at a time when the US and most of Europe experienced an unprecedented property boom).

    In Italy, the nuclear family is still the norm. A multi-generational family occupies the principal residence, passing from grandfather to son to grandson – not just for familial love, but to avoid taxes…. which apply in case of transfer on the basis of endowment (or inheritance), as well as prevailing mortgage and cadastral taxes, inheritance and endowment taxes etc., which varies according to the beneficiaries involved. Naturally, there’s a tendency to keep property in the family (survey any Italian, adult family member if they own the residence they occupy and the answer is invariably yes – and not ‘untrue’’).

    In Germany, property transfer is cheaper but, nevertheless, rental property is the norm – Germany, enjoys far greater rights and protection from poor landlords; eviction is virtually unheard of, and both sides have to give each other three months’ notice. For the landlord, this rises to six months once the tenant has stayed in the property for five years, and nine months after an eight-year rental. Those who rent tend to treat the property as a real home, decorating it and doing far more of the maintenance themselves than a tenant would in Italy or the US. On average, a tenant spends three to seven years in one property, much longer than in other countries.

    Other reasons include the difficulty of actually getting a mortgage – Germany has stuck to strict requirements on loan-to-value ratio. Among retired households (of 65 and older) that occupy their principal residence, about 80% own it outright. In Italy, over 95% of households over 65 own their home without a mortgage. But, a very small proportion of households in Italy has home debt. Even among young households, over 50% of them own their home outright. In the US, home-secured debt is very common. For those aged 25-64, over 60% still owe money on their house. Only for households of 75 and over do more than 80% not have a mortgage. It is also evident that in Italy and Germany (unlike in the US), net worth exceeds the value of the home. In the US the opposite is the case for all age groups, most likely due to outstanding debt.

    At a pragmatic level, overlooking social benefits in kind from the analysis, introduces a serious distortion when assessing income distribution and net worth, especially when drawing comparisons across countries. And, with regards to the EU (Italy and Germany) and the US: The EU provides comprehensive access to tax-funded, high-quality education, social services and healthcare, free of charge at the point of use.

    The US delegates provision of education, social services and healthcare largely to the market, which means that people, even those on low incomes, have to pay for healthcare(or for health insurance) out of their own pocket – or go without vital medical care. The distribution of income and, in particular, the situation of those on low incomes cannot be meaningfully compared without taking account of the fact that those at the bottom end of the income scale in an country EU country can rely on publicly funded healthcare whenever they fall ill or have an accident, whereas those in the US they cannot and have to spend the same amount on this for a given course of treatment as someone at the top of the income scale. Comparatively, Germany provides greater (cost per capita) social benefits (Healthcare, education, social services and unemployment) to its citizens than Italy or the US).

    In short, this noodle is either ‘al dente’ or ‘auf den zahn’, depending on your taste for economic survey agenda.

  22. Thorfinnsson

    As others have already indicated, the author is wrongly pinning the blame on the Hartz reforms rather than differing cultural attitudes to housing along with long-standing structural economic differences.

    Someone pointed out that the Hartz reforms are only around a decade old. In any case, according to the OECD disposable income is higher in Germany than Italy: https://en.wikipedia.org/wiki/List_of_countries_by_average_wage

    Nor does the distribution of income explain the difference, because according to most methodology Germany has a more equal distribution of income than Italy: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality

    In fact, the failure to enact labor market reforms in Italy has led to a two-tiered labor market consisting of coddled, older generations of workers with superb pay and benefits while younger generations are much poorer and much less likely to be employed.

    The cultural attitude to housing is, in my view, the most significant factor. The home ownership rate in Italy is 78%, but in Germany it is only 42%.


    My German aunt and uncle are in the their mid 60s, retired, and have three grown children. They rent. They have been renting the same apartment for over thirty years. In America this would be viewed as financial insanity, and apparently Italians view housing the same way. But Germans, famously risk-averse, have trouble pulling the trigger on home ownership. Furthermore economic policy deliberately reduces investment in housing, as German policymakers correctly understand that housing is non-productive. So in Germany, a combination of risk aversion and economic policy reduces investment in housing in order to increase investment in manufacturing (hence Germany’s massive trade surplus).

    Taxation also surely plays a role in differing levels of wealth. In Germany estates can be taxed as soon as they reach 20,000 euros in some circumstances, whereas in Italy the first million euros are exempt. The estate tax rate varies between 7-50% in Germany, but in Italy the maximum rate is just 8%. And at some times Italy has had no estate tax at all. So many Italians simply start out with more wealth than Germans, because they inherited it. Italy has an unusually high number of millionaires.


    Income taxes are higher in Germany than Italy too. The more income taxed away, the harder to build wealth.


    A final factor which I believe contributes to the differing wealth levels of the two countries is small business legislation. While Germans aren’t nearly as friendly to chain stores as Americans are, in Italy a massive body of legislation protects small retail establishments from competition, similar to Japan. This legislation dates to the 1920s and was a populist measure enacted by Mussolini to protect small shop keepers, especially grocers. It has never been eliminated. Meanwhile in Germany is the homeland of ALDI and Lidl. Since so many Italians own crappy small retail businesses, this means they have equity as well as assets, and thus more wealth than a German with perhaps the same income but who is a salaried employee.

    So while it’s too bad for Germans that they’re not as wealthy as Italians, it doesn’t seem that the Hartz reforms are to blame.

    And to all the commenters complaining about corporations earning money at the expense of workers, there’s a simple solution to that: protectionism.

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