"The German Saver" and the Low Policy Rate Environment

Open Access

Abstract

It is widely claimed that "the German saver" suffers (i.e. generates significantly lower returns on her savings) in the low interest environment that Germany currently experiences relative to a high interest rate environment. With "low interest rate environment", the observers tend to mean "low policy rates", i.e. the European Central Bank's (ECB) main refinancing rate. The ECB's main refinancing rate is plotted in Figure 1 and shows indeed the much lower level during the past several years relative to earlier in the decade and even any other post-war period (not shown). The arguments at first glance seem convincing: German households tend to be net-savers. On average, they save significantly more than they borrow. The median household's net wealth (including real estate) is about 50 thousand Euro and the median renter's net wealth is about 10 thousand Euro. 1 Furthermore, they tend to save in liquid (savings-) deposits and life insurance plans, both of which are particularly affected by the low policy rate environment.