- Data from August 2008, most recent data: Further Eurostat information, Database.
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This article analyses the financial behaviour of the household sector of national accounts, including non-profit institutions serving households, in the European Union (EU).
It considers households' financial assets - such as currency deposits and shares - and their liabilities.
Data on household financial assets are used by governments in setting social protection policies, especially pension provisions, as they give an indication as to how well-prepared households are for the future.
Household savings ratios also serve as a bellwether for an economy. Considered with other factors, such as economic growth, they give an indication of how households would be able to cope with an economic downturn.
The data presented in this article only go up to 2007 — the latest annual data available — and so do not reflect the most recent changes in financial markets.
Main statistical findings
Households’ stocks of assets
Graph 1 shows the total stock of financial assets held by the household sector and non-profit institutions serving households as a percentage of gross domestic product (GDP) for all EU countries sending data to Eurostat, plus Norway and Switzerland. It is worth noting that all data presented in this article are non-consolidated.
As Graph 1 shows, the stocks of financial assets held by the household sector as a percentage of GDP in 2007 ranged from 48 % for Slovakia to 375 % in Switzerland. Within the EU, the UK, Netherlands, Belgium and Italy rank high while, in general, it can be said that in the new Member States (in this chart the Central European Member States Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia and Slovakia), the stocks of financial assets as a percentage of GDP are smaller than in the other countries. That is, the size of the stocks seems to be correlated to per-capita GDP, although other variables, such as development of financial markets can be important. Table 1 shows the development of the stocks of financial assets for 2000–2007.
The ratio of total financial assets held by the household sector to GDP showed a moderate increasing trend in many countries until 2007. The pattern is rather more significant for countries, such as Denmark, Sweden and Finland. Moreover, it is interesting to note that this upward trend is especially strong in the new Member States, such as Bulgaria, Estonia and Slovenia. There are some countries, such as Greece, Belgium and the Netherlands, which do not show this pattern and their stocks as a percentage of GDP actually decreased during the period studied. It is also interesting to study which instruments households prefer to use to hold their financial wealth. This is shown in Table 2.
Table 2 shows the percentage of total financial stocks by instrument for 2000 and 2007. The instruments households prefer for their financial assets are currency and deposits (AF.2), shares and other equity (AF.5) and insurance technical reserves (AF.6). Securities other than shares (AF.3) and other accounts receivable/payable (AF.7) have some importance, while the stock of loans (AF.4) has only a symbolic presence in households’ portfolios. The table also shows the changes in the portfolio in the last seven years as a percentage of total financial assets. It is notable that, in many new Member States, the proportion of assets held in currency and deposits has decreased, while other instruments, particularly shares and other equity, are more popular. Graph 2 shows the situation in 2007 for each of the three main instruments held by households in each country.
There is no common pattern regarding the preferred instrument by households in the different countries. In some of them — for example, Belgium, Bulgaria, Estonia, Romania and Finland — shares and other equity is the instrument most commonly found in households’ portfolios. In others — such as Denmark, Ireland, France, the Netherlands and the United Kingdom — insurance technical reserves (which correspond to households’ assets in life insurance and funded pension schemes) are the preferred instrument. In some countries, the households’ portfolio is tilted towards currency and deposits, such as in Greece, Latvia, Lithuania, Slovenia and Slovakia.
Households’ liabilities
So far, we have focused on households’ holdings of assets. Now, we turn our attention to the liabilities side.
Graph 3 shows the total liabilities of households and non-profit institutions serving households as a percentage of their disposable income. This is a very important ratio, since it shows how many years it would take for households to pay off their debt if they used all of their income. As can be seen, this ratio has increased in most countries between 2000 and 2007 and, in the final year of this period, exceeds 100 % for Germany, Estonia, Spain, Portugal, Finland, Sweden and the United Kingdom. It is over 200% for Denmark, Ireland, the Netherlands, Norway and Switzerland. To analyse the preferred instruments by which households become indebted, Table 3 shows the total liabilities by instrument.
Table 3 shows that loans and other accounts payable (AF.4 and AF.7) are the instruments most used by households in all countries to get into debt. Loans represent over 90 % of liabilities in most countries, which is to be expected. There are no significant changes compared to the situation in 2000. Graph 4 shows the proportion of these two instruments in 2007 with a view to analysing the differences by countries.
It should also be noted that some countries show significant household liabilities in other financial instruments, for example shares and other equity. This is usually due to inclusion of unincorporated enterprises within the household sector or perhaps the inclusion of some non-profit institutions in the analysis. There are small changes in the liabilities structure of the households but the general pattern of these changes is an increase of loans as preferred instrument by households to obtain finance.
Only in France, Italy, Lithuania, Romania and Slovakia are other accounts payable of any significance (around 20 % of total liabilities), which shows the importance of trade credit as a way for households to acquire products in those countries.
Finally, Graph 5 shows net financial assets (BF.90), what we could call the net financial wealth of households, by country for 2000 and 2007.
Some countries — Belgium, Italy, the Netherlands, the United Kingdom and Switzerland — stand out due to the high level of the net financial wealth of their households as a percentage of GDP (over 200 %). There are also other two features in Figure 5 that deserve mentioning. On the one hand, net financial wealth decreased between 2000 and 2007 for almost all countries, as the start of the economic difficulties led to falls in asset prices in 2007. On the other hand, the new Member States show lower levels of household net financial wealth as a percentage of GDP in general (except for Bulgaria, Estonia and Slovenia).
Data sources and availability
The data presented only go up to 2007 — the latest annual data available — and so do not reflect the most recent changes in financial markets.
Context
Europe faces major structural challenges, including its ageing population and potential future shortfalls in pensions funding.
In 2000, EU leaders adopted the Lisbon Strategy, which was revised in 2005, to address these challenges up to 2010, aiming to stimulate sustainable growth and create more and better jobs, while respecting the environment and Europe's social model.
The EU will soon devise a new strategy for the period beyond 2010. This new strategy should enable the EU to make a full recovery from the economic and financial crisis and help speed up the move towards a greener, more sustainable, and more innovative economy.
Further Eurostat information
Publications
Database
- Balance sheets (fina_st)
Dedicated section
Methodology/Metadata
- Balance sheets (ESMS metadata file - fina_st_esms)
Other information
- Manual on sources and methods for the compilation of ESA95 financial accounts
- Manual on sources and methods for quarterly financial accounts for general government