European wealth reached unprecedented levels last year and is increasingly concentrated among families whose capital returns continue to outpace flagging economic growth during the pandemic, said a new report by a Zurich-based think tank. Luxembourg, the Netherlands and Belgium emerged as countries with the highest density of millionaires in the EU.
Total net wealth in Europe reached a record high of 69 trillion euro in 2020, a gain of 3.9 percent compared to a year earlier, said RFS (Redesigning Financial Services) in its European Wealth Report. Europe has witnessed a 45 percent increase in average wealth over the last decade and its wealth has roughly doubled since the year 2000, it says.
European adults, on average, have a net wealth of 199,471 euro. Switzerland leads in average wealth with €525,557 per adult, followed by Luxembourg (€297,172), the Netherlands (€278,196) and Belgium (€250,882). Slovenia, Greece and Slovakia rank on the opposite side of the scale, with average wealth per adult of less than €79,000.
Mixed picture for wealth concentration in EU
Considering the concentration of wealth, the UK, France, Germany and Italy have the most millionaires in absolute terms, the report said. Wealth concentration varies significantly. Among EU countries, Luxembourg has the highest density of millionaires, at 8.8 percent, followed by the Netherlands, at 7.1 percent, and Belgium, with 5.4 percent. That compares to just above 4 percent for Europe’s three biggest countries.
Zani Sharifi, Managing Director at RFS, said the high density of millionaires in the Benelux countries is “disproportionate” and cannot be explained. “In short, we have no visibility into the historical reasons,” he said.
The wealthiest 1 percent of European households have average net wealth of €3.8 million and own 19 percent of total European wealth. In Switzerland and the Netherlands the one-percenters own respectively 28 percent and 27 percent of their national wealth. Italy and Greece have the lowest wealth concentration. The top 1 percent owns just 9 percent and 12 percent, respectively.
Inequality gap widens
RFS said it sees a need for further analysis of trends in household savings and investments to determine what effect the pandemic had on widening wealth inequality. Due to low interest rates, households with a relatively large share of savings may not have benefitted as much from capital gains achieved in financial markets.
The bulk of Europe’s wealth is concentrated in the region’s four largest countries. Households in Germany, France, Italy and the United Kingdom together have a fortune of €49 billion, more than two thirds of total net private wealth in Europe. RFS defines net wealth by considering the value of both financial and non-financial assets such as real estate investments, as well as debt. European household debt levels make up a non-negligible one-third of gross financial assets, it said, noting that almost 70 percent of people in Europe own their homes.
Looking ahead, RFS said longer-term trends in net wealth are difficult to predict because of the “precarious economic context of rising inflation” and the prospect of tighter monetary policy. Nevertheless it expects net wealth in Europe will grow further, driven mainly by the larger economies recovering from the pandemic while it foresees that peripheral European economies will build some of the wealth they lost during the 2020 pandemic. “Families owning capital are about to gain a larger slice of Europe’s expanding wealth cake,” the European Wealth Report concluded.
ECB monitors wealth distribution
Wealth studies are closely monitored by the European Central Bank (ECB) because these trends may also affect monetary policy. ECB board member Isabel Schnabel said in November that “there is a risk that monetary policy may disproportionately benefit those in the higher ranks of the wealth distribution. Central banks therefore have a duty to integrate such considerations into their decision-making process as part of their regular proportionality assessment.”
