There is all sorts of analysis floating around as to why Germans cannot be less wealthy than Southern Europeans (see Wolfgang Munchau in FT and Paul De Grauwe and Yuemei Ji at Voxeu). The latter analysis seems to argue that Germany is a very unequal country and while mean households are not wealthy the top ones are and they should be putting more money into transfers to the south.
Against this one might argue that the famous Swabian housewife might be more concerned that the taxes of wealthy Germans go into social provision in Germany - as there has been a de facto trade off between wage restraint and social provision. Hypothocating wealthy taxes to a bailout fund would still represent a loss to the mean German household.
Maybe we should extend the argument further and suggest that the German financial authorities should get on with reflating their domestic economy and reducing their trade imbalances - if Martin Wolf is to be believed this would kick start German and EU growth. The Swabian housewife would then benefit from growing domestic consumption and incomes and might feel less inclined to be pissed-off with modest transfers to the south. But elections loom.
My concern here is to add a bit more information about the differentials between Cyprus and Germany - which is where the debate started. This is because Cyprus, at least in terms of its household wealth and incomes, is a case apart from an aggregated 'Southern European case'.
Equivilised disposable incomes
Another way of looking at relative levels of affluence is through mean and median income equivalised disposable incomes. Amazingly a Eurostat study shows that Cyprus had higher median equivalised
disposable incomes in all three age brackets (18-24, 24-49, and 50-64) than Germany in 2007.
The median equivalised income in Cyprus in 2007 was €18,230 compared to €11,577 in Greece and €17,338 in Germany. Even the mean figures, Wolfgang Munchau's preferred measure, show a higher equivalised disposable income in Cyprus than Germany.
At real Euros the mean in 2007 for Cyprus was €18,500 to €20,208 in Germany while at equivalised disposable income it was €21,100 in Cyprus against €19,787 in Germany.
The growth in per capita earnings in Cyprus is staggering:
In per capita income terms, Cypriots quadrupled their real earnings, in constant money, between 1975 and 2011, according to the World Bank; in nominal terms, or current US dollars, the UN records a rise in earnings per head from $1,451 to $30,523 over the same period.
FT Gardner 7 April 2013
GDP per capita at PPS in Cyprus is greater than in most of UK regions
In 2012 a Eurostat report of EU regional GDP put Cyprus's 2009 GDP per capita at purchasing power standards at €23,500. This was was 99.9% of the EU 27 member state average.
The figure for Greece was €22,600 per capita at 94.3% of the EU average. Spain was €25,400 and 103.2%. Portugal was €19,300 and 80%.
In terms of per capita GDP at PPS then Cyprus stands between Spain and Greece and is well above (20%) Portugal.
The GDP per capita figure for Cyprus was above the following regions/countries in the UK:
- NE England
- NW England
- SW England
- Yorkshire and Humber
- East and West Midlands
- Highlands and Islands of Scotland
- Northern Ireland.
The total GDP per capita for the UK is 110% of the EU average but this is largley accounted for by London 189%, the South East 116% and Scotland 107%.
The lowest scoring sountry/region in the UK is West Wales and the Valleys at 68.4% and Cornwall and the Isles of Scilly at 71.9%
The lowest regional GDP figure recorded in the EU in 2009 was Severozapaden in Bulgaria at 27% of the EU average.
Eurostat notes: 'GDP does not measure the income ultimately available to private households in a region' as presumably GDP does not take account of transfer payments.
For above see Economic Fallout.
There does then seem to be a body of empirical evidence that Cyprus is different from Southern Europe and that on measures such as median incomes, household wealth and GDP per head it is has been amazingly successful since the very dark days following the de facto partition of the island.
The situation was not all rosy in Cyprus even before the bailout.
It was ranked first for poverty amongst the elderly as relative poverty risk in the EU in 2008, and social provision is both low and relatively ineffective at combatting inequality (see my Cyprus Social Fallout page).
So it can be argued that the high household wealth of Cypriots (as well as being indicative of a rapidly deflating housing bubble) is also a means of offsetting patchy social provision - particularly with regard to healthcare - with precautionary saving.
Nevertheless, before the bailout Cypriots did seem remarkably well-placed in hierarchy of income and household wealth in the EU 27.