For a Rainy Day
October 30, 2007
On average, Germans saved 170 euros ($245) a month in the first half of 2007, resulting in a national total of 84 billion euros for the six-month period.
The seasonally adjusted savings ratio of 10.9 percent represents an increase of 0.4 percent over last year, as reported Monday by Germany's Federal Statistical Office, just in time for International Savings Day on Oct. 30.
DW-WORLD.DE spoke with business analyst Michael Grömling from the Cologne Institute for Economic Research to find out why Germans seem to be putting more money aside these days.
DW-WORLD.DE: Mr. Grömling, why are Germans saving more?
Michael Grömling: They're saving more in relation to disposable income. It mainly has to do with the value-added tax, which was raised from 16 to 19 percent on Jan. 1, 2007. This led to increased consumption during the previous year in order [buy early] to avoid paying the higher tax. To make these purchases, many citizens dug into their savings. The savings that were depleted last year are, in part, being built up again this year.
How significant is a 0.4 percent increase in the savings ratio?
It means several billion euros that are pulled out of the consumption circuit. However, we'll have to wait and see how the savings pattern develops in 2007 as a whole.
It definitely has to do with the fact that consumption was high in the second half of 2006 and that, because of this, many didn't need to make purchases in the first half of 2007. For example, those who bought cars last year don't have to buy another one this year. As a whole, it's not an alarming development.
Germans are known for being bigger savers than other Europeans and certainly than the Americans. Why is this?
It has to do with a series of programs we've started in the past few years that encourage people to save more due to demographic developments. The population in Germany will become drastically smaller in the next few years and decades. The social security system won't be able to support people later in life to the same extent so they have to put aside more money now.
In comparison with the US, it's also worth mentioning that the low savings ratio there is more problematic than the high savings rate in Germany.
According to the report from the Federal Statistical Office, Germans tend to save conservatively -- in banks and bonds, for example. What can this be attributed to?
It goes back to the stock market crash in 2000, which continued until 2003. The fact that Germans invest their money so conservatively also has to do with the German mentality.
According to recent reports, unemployment is down and inflation is up in Germany. Do these factors play a role in Germans' savings habits?
Not at this time. The relatively stable job market in comparison to previous years should be a reason for lower savings. Discussion about savings over the past few days don't apply here, in my opinion. The higher inflation rate may have an impact but we have to wait and see how long this phenomenon lasts.