According to the latest data, European households will save one-eighth of their income in 2022. But in which countries are people saving the most? Euronews Business takes a look.
The question is whether to save it or not. Last year, Europeans chose to save an eighth of their income, according to the latest data released by the EU’s statistics agency Eurostat.
In 2022, EU households saved an average of 12.7% of their disposable income, while the euro area savings rate was higher at 13.7%.
According to Eurostat’s definition, household disposable income is the amount available to a household for spending and saving, excluding taxes and transfers.
“If a household has an income of 100 euros, they will spend 78.3 euros and have 12.7 euros available to spend,” Asters chief economist Sylvain Barsinger said. “This is a normal figure. Household savings rates in most EU countries are between 10 and 15 percent,” he added.
That’s much higher than in the United States, where residents saved just 3.4% of their income as of September 2023, according to Statista.
Germany becomes European champion
In the EU, Germany topped the podium with the highest gross savings rate (19.91), followed by the Netherlands (19.44) with silver and Luxembourg with bronze (18.14).
Two countries are in deficit and have negative savings rates. Expenses are more than income. Their earnings alone are not enough to cover their consumption, so they borrow or draw on past savings. These two countries are Poland and Greece.
However, European households cannot be summarized in one profile. Luigi Guiso, a researcher at the Center for Economic Policy Research (CEPR), explained that there are huge differences in saving behavior in Europe “as well as between families”. “Some people spend everything, while others save a significant portion of their income, and it’s hard to understand why.”
Wealth is certainly one factor that explains systematic disparities in household savings rates. “We can see that countries with lower incomes are struggling to meet their needs and therefore are saving very little,” said Deslinger, chief economist at Asters.
The same goes for Greece, which has suffered major economic difficulties and imposed a series of austerity measures that have reduced household disposable income.
“The negative savings rate shows that Greeks are not yet out of the crisis. On the other hand, countries that save the most tend to be richer,” Desslinger said.
Some experts point to cultural differences in savings habits. According to OECD data, Germans have consistently saved more than 8% of their disposable income over the past 20 years.
However, Luigi Guiso feels there are limits to this explanation. “There is no difference between Germany and Greece because the Greeks want to spend everything and the Germans don’t. Twenty years ago, the savings rate in Germany was low.”
A country’s savings rate is influenced by many economic variables, including the country’s demographic structure. “Young people tend to save more than retirees with lower incomes,” Guiso explained.
return to pre-pandemic levels
Eurostat also reveals that Europeans will save less in 2022 than in 2021 (16.4%), which could bring the household consumption rate back to pre-pandemic levels and further expand household consumption. I made it.
“This reflects a desire to return to pre-COVID-19 normal life,” said Helene Bauchon, economist at BNP Paribas.
“During the pandemic, Europeans’ household consumption halted, but their incomes were largely maintained. This led to an extraordinary rise in savings rates across the EU,” Bauchon said.
On the other hand, 2022 will see an economic recovery phase, which explains the decline in the savings rate compared to the previous year.
However, a series of post-pandemic shocks, such as Russia’s invasion of Ukraine and the resulting rise in living costs, have also disrupted household savings behavior. “Economic uncertainty is likely weighing on household consumption, supporting precautionary savings,” he said.
Another factor causing Europeans to save more than they spend is rising interest rates. “Today, credit is more expensive and savings are more rewarded. There are real economic incentives to keep your money in the bank.”
Will the savings rate increase?
Experts predict that there will be little change in the household savings rate next year.
“Next year is expected to be a bit more positive. As inflation declines and the effects of the economic shock dissipate, households will likely be less anxious about the future and save less,” Bauchon said.
Household savings rates will remain flat or decline. “But predictions mean they can be wrong, so let’s talk in a year to see if we were right,” she added.