Euro-Zone Consumption Gap to Widens

The gap between individual consumption in Germany and those euro-zone countries pursuing austerity programs continued to widen last year, according to figures from the European Union's official statistics agency Wednesday.

Within the currency area, individuals in Greece, Ireland, Italy, Portugal and Cyprus suffered relative declines in consumption of goods and services in 2013, while their counterparts in Germany, Belgium and Estonia saw their relative consumption increase, the data from Eurostat showed.

The euro zone's twin government debt and banking crises have eased since mid-2012, and the currency area's economy returned to growth in early 2013. But growth remains very weak, unemployment is near record highs and governments continue to shrink their budget deficits in an effort to halt a rise in already very high debt levels.

Although the pace of budget cuts slowed in 2013 and is likely to do so again this year, the figures show that individuals in many parts of the bloc continued to consume less relative to the EU average, while Germans continued to consume more.

Eurostat Wednesday published figures for Actual Individual Consumption, which is a comprehensive measure of the volume of goods and services consumed. While income-per-capita records only what individuals can spend themselves, AIC adds in goods and services provided by the state, such as health and education.

Using the AIC measure, household consumption in Cyprus slumped in 2013, to 92% of the EU average of EUR18,455 ($25,000) from 97% in 2012. Italian household consumption fell to 97% of the average, from being exactly on the average in 2012; while Portuguese household consumption fell to 76% of the average from 77%. In Greece, consumption once again fell sharply, to 82% of the average from 86% in 2012, while In Ireland it dropped slightly to 97% from 98%.

By contrast, German household consumption rose to 125% from 123%.

Greece, Ireland, Portugal and Cyprus have had to take bailouts from the EU and the International Monetary Fund after investors became unwilling to buy their government bonds. Under those programs, they had to cut government spending and raise taxes. In Spain, whose banking system required a bailout, there was no change in AIC

The changes in relative household consumption are part of the rebalancing of the euro zone's economy. Many of the nations that have embarked on austerity had consumed more than they produced in the years running up to the fiscal and banking crisis, accruing large current-account deficits and borrowing heavily from abroad.

The widening of the gap between consumption in Germany and southern Europe since the start of the 2008 financial crisis has been marked. In 2007, Germany's AIC was 113% of the EU average, while Greece's AIC was 99%, a gap of 14 percentage points. That gap is now 43 percentage points.

But Germany has also widened the gap with the euro zone's second-largest economy, France. In 2007, France's AIC stood at 112% of the EU average, almost level with Germany's. Last year, the gap was 12 percentage points.

Write to Paul Hannon at [e-mail]

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