IF YOU DON'T HAVE YOU CAN'T SPEND:

Frugal Europeans hold up recovery: Struggle is on to persuade consumers to spend despite economic uncertainty (Nicola Clark, July 22, 2004, International Herald Tribune)

"The thing that is most disturbing is that as the economy has started to pick up, you haven't had a similar pickup in demand," said Michael Hume, an economist at Lehman Brothers International in London.

Marlene Kaldenbach, 52, a part-time saleswoman from Krefeld, about 50 kilometers, or 30 miles, north of Cologne, sees this hesitation on a regular basis, despite the longer shopping hours and other consumer incentives introduced by the German government in recent years.

"When people don't have the euros, they don't go shopping," she said.

In the United States, and increasingly in the credit-happy United Kingdom, the average shopper might well whip out a Visa or MasterCard to purchase those summer shoes. Perhaps the debt would be consolidated under a personal loan, through a mortgage - far more widespread in the Anglo-Saxon world than in continental Europe - or any number of vehicles that make it easier to spend more money than one has in the bank.

But people like Ficon are shaped much more by a cultural predisposition to save, a tendency exacerbated in Germany by lingering memories or stories of hyperinflation in the Weimar era between the two world wars. European savings rates are among the highest in the world.

In the euro area, made up of Germany and 11 other countries, annual household savings as a percentage of disposable income average around 12 percent, about double the rate in Britain and Japan; Americans save little more than 2 percent.

Ficon said she had never bought anything on credit. "I know how much income I have, and it will be the same next month as this month," she said. "If I can't afford something today, I can't see how I will later."

In the United States, "the share of people prepared to take risks is higher," said Norbert Walter, chief economist at Deutsche Bank in Frankfurt. "There was a very specific selection of the kind of people who immigrated to America. All the risk-takers left, and the risk-averse people have stayed."

Prudence arguably breeds stability. But a nation, or nations, full of hesitant spenders neither ignites economies nor spurs the pace of growth when a cyclical recovery emerges, like the one that economists forecast for Germany.

The whole thing is hilariously inept, some highlights:

* Europeans don't have money and correctly fear their bleak future, why aren't they spending more?

* Europeans don't have equity to borrow against like Americans do, why aren't they borrowing?

But far and away the best is the comparison of German to American stability with Germany coming out ahead.

Posted by Orrin Judd at July 22, 2004 10:28 AM