How German politics is contributing to the dispossession of savers

Mario Draghi has just ended his term as president of the European Central Bank. He led the bank since 2011 but hardly enjoyed the best of reputations in Germany – in the end it was his radical low interest rate policy which made Germany’s beloved savings accounts so utterly unviable. It is not without good reason that the ECB’s policy is often accused of dispossessing German savers. The criticism aimed at the ECB is actually somewhat hypocritical, because there is so little in the way of support or encouragement for systematic alternative investment strategies within Germany. This is what is actually dispossessing German savers: despite the low interest rates, there appears to be no way out of the malaise and any escape routes are beset with obstacles.

One example is the purchase of stocks. It is now easier than ever to participate in the stock market, particularly thanks to the success of ETFs and ever decreasing holding charges. Even small investors are now in a position to accumulate a widely diversified share portfolio and to benefit from the growth in those companies, thus spreading the risk over the longer term. One would imagine that this type of private capital investment would be supported by the politicians, but the truth is the exact opposite.

The federal minister of finance proposes to introduce a financial transaction tax. This has been in discussion for over a decade, having started as a reaction to the financial crisis with the intention of increasing the taxation of financial speculation. The current plan is to tax only shares rather than more risky derivatives. Luxembourg for example has no intention of introducing this type of tax, which in any case is of little relevance to many institutional investors. It is actually the individual saver looking to make just a few percent of yield who is now branded an avaricious speculator and a target for suppression.

Vis-à-vis the greedy speculator: this meanwhile applies to anyone owning residential property in Germany. The topic of real estate is generally explained in terms of the eternal struggle between landlords (bad) and tenants (good), but not as it should be – as a sensible investment providing a highly efficient hedge against poverty in old age, irrespective of whether it functions as a capital deposit or is occupied as a home. No wonder then that the ownership of residential property in Germany has stagnated at a very low level for many years now. There is little in the way of encouragement to own residential property in Germany, apart from the Baukindergeld child benefit which has its limits in terms of both duration and eligibility for funding. Instead, there are continual hikes in real estate transfer tax, which property purchasers must pay from their own savings and which makes the acquisition of residential property significantly more challenging.

Anyone looking to accumulate a private pension fund in Germany must first clear a whole raft of impediments and preconceptions. This also contributes to the inequitable distribution of wealth. Anyone owning stocks and real estate benefits from the low interest rate environment as both shares and property tend to increase in value; anyone relying entirely on savings accounts and life insurance - which is promoted by politicians as the only sensible route for the rank and file - is losing money hand over fist. It is quite clear that the wealth gap will be ever widening as long as private households are actively discouraged from making sensible investment decisions.

So are we now seeing the dispossession of German savers? The easy answer is yes, but the primary culprit is not Mario Draghi or the ECB, but German politics.