Professional Documents
Culture Documents
33/2010
Author: Ismael AHAMDANECH ZARCO
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BE DK DE IE ES FR IT LV LT HU NL AT PL PT SI SK FI SE UK
Household Disposable Income includes the adjustment for the change in net equity of households in pension funds
reserves.
Source: Eurostat (fina_st)
In almost all countries the first year of the financial household disposable income varied, in 2008, from
crisis led to the reduction of stocks of net 1% for Latvia to 291% in Belgium. In other words,
household financial assets as a percentage of their while in Latvia net financial assets of households
disposable income. As will be seen later, a were equivalent to around three days of disposable
significant part of this decrease was due to the income, this were close to three years in Belgium.
downturn of financial markets. One important issue highlighted by Figure 1 is that
net financial wealth was smaller in 2008 than in
As figure 1 shows, the stocks of net financial assets
2000 for most countries present in the analysis. It is
held by the household sector as a percentage of
also noticeable that in countries with lower levels The decrease in net financial assets can be
of GDP the stock of net financial assets as a explained either by an increase in liabilities or by a
percentage of GDP is smaller, which would decrease in assets. The following figures show the
indicate a correlation between the size of net stocks evolution of these variables.
and GDP (it is clear that other variables such as
development of financial markets should be taken
into account for a deeper analysis).
Figure 2: Households’ stock of financial liabilities as percentage of household disposable income
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BE DK DE IE ES FR IT LV LT HU NL AT PL PT SI SK FI SE UK
2007 2008
Household Disposable Income includes the adjustment for the change in net equity of households in pension funds
reserves.
Source: Eurostat (fina_st)
Figure 2 shows households' stock of financial financial assets and liabilities can be due to either
liabilities as a percentage of disposable income. As transactions during the year or to other economic
can be seen, the ratio of liabilities to disposable flows such as nominal holdings gains and losses
income increased in some countries between 2007 and other changes in volume. To understand why
and 2008, the exceptions being Germany, Spain, the stock of financial liabilities increased, it is
Latvia, Austria, Portugal and the United Kingdom. interesting to recall that, as shown in figure 3, most
This increase implies that households would need household liabilities are loans, although for some
more years to pay back their liabilities. On the countries other accounts payable are also important
other hand, it also partly explains the decrease of (other accounts payable refers to instruments such
net financial stocks. Changes in the stock of as trade credits).
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BE DK DE IE EL ES FR IT LV LT HU NL AT PL PT RO SI SK FI SE UK HR NO CH
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BE DK DE IE EL ES FR IT LV LT HU NL AT PL PT RO SI SK FI SE UK HR NO CH
2007 2008
As figure 4 shows, the incurrence of liabilities via in 2008. On the other hand, without this effect, net
loans by households decreased in 2008 compared financial assets of households would have
with 2007 in almost all countries (the exceptions decreased even more. Turning to the assets side,
being the Netherlands, Poland and Switzerland). figure 5 shows the stock of financial assets as a
This implies two things: on the one hand, it is a percentage of household disposable income.
clear indicator of the reduction of credit availability
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BE DK DE IE ES FR IT LV LT HU NL AT PL PT SI SK FI SE UK
2007 2008
As mentioned before, part of the drop in the stock Hungary and Slovakia, the stock of financial assets
of net financial assets is explained by the increase as percentage of disposable income fell between
of financial liabilities. The other part is due to the 2007 and 2008. Regarding the type of financial
decrease in the stock of financial assets, as shown assets, in figure 6 the financial instruments
in figure 5. In all countries, except Lithuania, preferred by households can be clearly seen.
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BE DK DE IE EL ES FR IT LV LT HU NL AT PL PT RO SI SK FI SE UK HR NO CH
Currency and Deposits Shares and Other Equity Insurance Technical Reserves Other
There is more diversification between instruments households in the different countries, although
on the assets side than for liabilities (in fact, for from the figure above it can be seen that shares and
some countries assets held in securities other than other equity is an important instrument in many
shares by households are also important, although countries. For this reason, the analysis can be
they are not included in the figure for the sake of extended to examine this instrument as an example
clarity). There is no common pattern regarding the of how the beginning of the financial crisis has
preferred instrument by affected households.
Figure 7: Households’ stock of financial assets in shares and other equity. 2006=100
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BE DK DE IE EL ES FR IT LV LT HU NL AT PL PT RO SI SK FI SE UK HR NO CH
2007 2008
As can be seen in table 1, transactions in assets of Switzerland. This means that households sold more
shares and other equity decreased between 2006 equity and other shares than they bought. However,
and 2008 for almost all countries and, more this fact does not explain completely the change in
importantly, they were negative in 2008 for all the stock of this instrument in 2008.Table 2 helps
except Denmark, Ireland, Lithuania and to complete the picture.
Table 2: Households’ other economic flows of financial assets in shares and other equity. Million of
euro.
As shown in table 3, there was a decrease in the significant in most countries. In other words, the
value of household financial assets via other situation of financial markets in 2008 had a serious
economic flows in all countries, except Lithuania impact on households, reducing their stock of
and Slovakia, this decrease being very financial assets.
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