BERLIN (MNI) – The European Central Bank in its annual report
released Monday predicted household savings in the Eurozone would
decline further but noted that uncertainty remains high.
Following the drop in household savings during 2010, “further
modest falls” in the Eurozone household saving ratio are expected in the
future, with households prompted to pare their precautionary savings as
the economic recovery gains traction and the labor market continues to
improve, the report stated.
“Nevertheless, uncertainty about the course of household savings
remains high,” the ECB acknowledged.
On the downside, a faster than expected recovery might improve
confidence, leading households to increase their consumption and reduce
the amount they save, the central bank said.
“However, it is also possible that the level of household saving
could remain persistently higher than before the downturn, if the crisis
has caused households to worry more than before about income prospects
or pushed them to further rebuild balance sheets and reduce their debt
levels – the adjustment over the past three years notwithstanding,” it
said.
In addition, following the bursting of bubbles in some asset
markets, households may now have a less optimistic assessment of future
wealth accumulation prospects, the ECB pointed out.
Savings may also remain high if households are concerned about the
implications for their future tax burden of the high levels of
government debt and the large government deficits, the central bank
said.
“Such concerns highlight how important it is that euro area
governments provide credible fiscal consolidation strategies to correct
the large fiscal imbalances that built up during the recession,” it
said.
–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com
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