Opinion

Can households in the European Union make ends meet?

Half the households surveyed by Eurostat see themselves as unable to find the resources they would need to cope with an unexpected expense within a month, estimated by experts at €375 in the case of Greece.

By: , , and Date: July 24, 2020 Topic: Finance & Financial Regulation

This article originally appeared in the Greek daily newspaper “Kathimerini”.

Would you be able to afford a medium-size unexpected cost in your family, say a surgery or a funeral, urgent repairs at home or needing to replace a washing machine? This is a question asked in a survey carried out by Eurostat, the European Union’s office of statistics, aiming to understand how households assess their own capacity to afford an unexpected expense.

One in three households in the EU are unable to afford such an expense. The corresponding figure in Greece is 50%, which puts the country in the third worst position after Latvia and Croatia. Half the households surveyed deem themselves unable to find the resources they would need to cope with an unexpected expense within a month, estimated by experts at 375 euros in the case of Greece.

The amount of 375 euros represents about a quarter of the average monthly income of Greek households (1,600 euros). The choice of such an amount does not aim to test the “affordability” of income. Rather, it aims to check whether households have enough savings to use for a rainy day, a concept known as “financial resilience.” Or in the absence of funds, a concept known as “financial fragility,” in other words, the inability to cope with expenses that are not daily, but are not entirely rare either.

Greece’s position has not always been that low. At the beginning of the financial crisis, in 2009, 25% of Greek households estimated themselves as being financially fragile. That was below the EU average and half of what it is now. But from 2010 to 2014, when the ratio stabilized at 50%, the number of households unable to afford such costs doubled. By contrast, the median EU household fragility has remained stable, although there are very substantial differences between countries.

This is not a story about the poorest segments of the population. The objective of the Eurostat survey is to understand how the average household fares in terms of fragility. The numbers, collected last in 2018, show that a good number of households across Europe came into the pandemic lockdown with inadequate savings. The aftermath of this recession is not yet known, but we know that many households will reach and even cross the poverty line, with corresponding social consequences.

Admittedly all countries in Europe did provide assistance to those immediately hit. But this assistance can only be temporary and targeted. The average household needs to be in a position to help itself. And yes, while more income is always better, the concept of financial fragility is about the ability to save.

The Eurostat survey also shows that these numbers do change but not quickly, and that is because the habit of saving, necessary for financial resilience, is something that needs to be taught and supported.

Many countries now have initiatives to increase awareness, support and encourage households to improve their financial wellbeing. From promoting and supporting financial literacy at all levels of the education system, to providing direct advice in hard times, the financial wellness of households is an integral part of societal welfare. So that households are better prepared for both their long-term income needs (e.g. securing resources for their old age) as well as for the most short-term variable needs, both planned and unplanned.

For a continent that has built a society that values welfare and safety nets, it comes as a big surprise if not disappointment to see quite how many of us are unable to meet the expenses of a funeral or an unplanned house repair. The European middle class is not as financially secure as it might have wished to be.

This article is based on the recent Bruegel Policy Contribution The financial fragility of European households in the time of Covid-19″ by the same authors


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read article More on this topic More by this author
 

External Publication

A Safety Net for the Green Economy

How to protect workers hurt by the fight against climate change.

By: Simone Tagliapietra Topic: Energy & Climate Date: July 20, 2021
Read article Download PDF
 

External Publication

Building the Road to Greener Pastures

How the G20 can support the recovery with sustainable local infrastructure investment.

By: Mia Hoffmann, Ben McWilliams and Niclas Poitiers Topic: Global Economics & Governance, Testimonies Date: July 15, 2021
Read about event
 

Past Event

Past Event

Financing for Pandemic Preparedness and Response

How can we better prepare for future pandemics? In this event, co-hosted by the Center for Global Development and Bruegel think tanks, speakers will present "A Global Deal for Our Pandemic Age", a report of the G20 High Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response.

Speakers: Masood Ahmed, Victor J. Dzau, Amanda Glassman and Lawrence H. Summers Topic: Finance & Financial Regulation, Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 14, 2021
Read article More on this topic
 

Blog Post

Fair vaccine access is a goal Europe cannot afford to miss – July update

European countries must do more to tackle the vaccine uptake gap. Vaccination data should be published at the maximum granularity level so researchers and local decision-makers can monitor progress.

By: Lionel Guetta-Jeanrenaud and Mario Mariniello Topic: European Macroeconomics & Governance Date: July 14, 2021
Read article More on this topic
 

External Publication

A Global Deal for Our Pandemic Age

Report of the G20 High Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response.

By: Tharman Shanmugaratnam, Lawrence H. Summers, Ngozi Okonjo-Iweala, Ana Botin, Mohamed El-Erian, Jacob Frenkel, Rebeca Grynspan, Naoko Ishii, Michael Kremer, Kiran Mazumdar-Shaw, Luis Alberto Moreno, Lucrezia Reichlin, John-Arne Røttingen, Vera Songwe, Mark Suzman, Tidjane Thiam, Jean-Claude Trichet, Ngaire Woods, ZHU Min, Masood Ahmed, Guntram B. Wolff, Victor J. Dzau and Jeremy Farrar Topic: Global Economics & Governance Date: July 9, 2021
Read article More on this topic More by this author
 

Opinion

The end of globalisation as we know it

The tension between the unprecedented need for global collective action and a growing aspiration to rebuild political communities behind national borders is a defining challenge for today’s policymakers.

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: July 1, 2021
Read article More on this topic More by this author
 

Opinion

What to expect from the ECB’s monetary policy strategy review?

Emphasis will be placed on greening monetary policy and clarifying the ECB's price stability objective, but is this enough?

By: Maria Demertzis Topic: European Macroeconomics & Governance Date: June 23, 2021
Read article More on this topic
 

Blog Post

The socio-economic consequences of COVID-19 in the Middle East and North Africa

Confronted with COVID-19, high-income Gulf countries have done better than most of their middle- and low-income neighbours; Jordan and Morocco are also positive exceptions.

By: Marek Dabrowski and Marta Domínguez-Jiménez Topic: Global Economics & Governance Date: June 14, 2021
Read article Download PDF More on this topic More by this author
 

External Publication

The Value of Money, Controversial Economic Cultures in Europe: Italy and Germany

A discussion of Italian and German macro-economic cultures and performances.

By: Francesco Papadia Topic: European Macroeconomics & Governance Date: June 10, 2021
Read article Download PDF More on this topic
 

Policy Contribution

Blending the physical and virtual: a hybrid model for the future of work

The pandemic has shown that many workers can efficiently work remotely, with benefits for wellbeing and even productivity. The European Union should develop a framework to facilitate hybrid work.

By: Monika Grzegorczyk, Mario Mariniello, Laura Nurski and Tom Schraepen Topic: Innovation & Competition Policy Date: June 9, 2021
Read article More on this topic More by this author
 

Opinion

Is Bidenomics more than catch-up?

The Biden administration's promises to 'think big' and rebuild the country seem like a major historical departure from decades of policy orthodoxy.

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: June 3, 2021
Read article More by this author
 

Opinion

Inflation, inequality and immigration: Spelling the digital recovery with three “I”s

The digital transition offers us a new opportunity to reach out across the global economy - hopefully we will find the strength to use it.

By: Rebecca Christie Topic: Global Economics & Governance, Innovation & Competition Policy Date: June 3, 2021
Load more posts