Euro area wealth inequality remains elevated in countries hardest hit by debt crisis

Wealth inequality in the euro area rose during the 2010–2013 sovereign debt crisis and has since returned close to its pre-crisis level overall, but it remains higher in the countries hit hardest, according to a European Central Bank analysis of household survey data.

The ECB authors say the crisis widened wealth gaps from 2010 to 2014 as falling house prices eroded the net wealth of households with mortgages, while savings were squeezed, particularly among poorer households. Equity prices, by contrast, recovered relatively quickly; shares are mostly held by wealthier households.

The analysis draws on the Eurosystem Household Finance and Consumption Survey, which is based on about 90,000 household interviews across 22 countries. The ECB’s Gini measure of wealth inequality rose from 68.2 in 2010 to 69.7 in 2014, then fell to 68.5 in 2023, close to its starting point.

Other measures show that the recovery was uneven. The wealthiest 10 per cent held 51.8 per cent of household net wealth in 2023, up from 50.8 per cent in 2010, though below the 2014 peak of 52.6 per cent. The bottom half’s share rose to 6.2 per cent in 2023, from 6 per cent in 2010, after falling to 5.4 per cent in 2014. A household at the 90th percentile held five times the wealth of the median household in both 2014 and 2023.

The ECB researchers found the rise in inequality was larger and more persistent in Cyprus, Spain, Greece, Ireland, Italy and Portugal than in other euro area countries. In those six countries, inequality continued rising until 2021 and remained above its 2010 and 2014 levels in 2023. In the other countries covered, the Gini measure had fallen 2.1 points below its 2010 level by 2023.

The authors point to the difficulty poorer households in the hardest-hit countries faced in rebuilding savings, as well as a decline in home ownership, particularly among younger people. As house prices recovered, fewer households owned homes that could rise in value, a factor the ECB says kept upward pressure on inequality.

Across the euro area, the authors say inequality changed little during the COVID-19 pandemic, partly because of government support. The inflation surge from 2021 to 2023 had mixed effects: rising living costs reduced poorer households’ savings, while inflation lowered the real value of assets and debts. The ECB analysis says the latter effects, alongside targeted government measures, outweighed the squeeze on savings and helped reduce inequality somewhat.