Why the Wirecard scandal could become a complicated affair for the Berlin government

The federal government's support for Wirecard to enter China and contacts between the Bavarian company and lobbyists close to the secret service put pressure on government circles in Berlin. What did the Ministry of Finance and the Berlin Chancellery know about the real situation of the company? The well-informed German Foreign Policy reconstructs the Wirecard affair and the responsibilities of Berlin's political circles.

Talks with the Secretary of State

After the outbreak of the "Wirecard case" the German Ministry of Finance ended up at the centre of public debate. The Ministry is responsible for monitoring the Federal Financial Supervisory Authority (BaFin), which in early 2019, after a detailed investigation of Wirecard's irregularities by the Financial Times, reacted by even helping the Bavarian company with a ban on "short selling" the share and at the same time lodging a complaint against the investigating journalist and also subjecting the company to a simple inspection by the Deutsche Prüfstelle für Rechnungslegung (DPR), which was not expected to lead to any results [1]. The Board of Directors of BaFin is headed by Jörg Kukies, Secretary of State at the Ministry of Finance. As Kukies recently confirmed to the Chairmen of the Bundestag Finance Committee, he has been keeping Minister of Finance Olaf Scholz updated on developments in the Wirecard case since early 2019. He also had at least two talks with Wirecard CEO Markus Braun, one on 4 September, and one on 5 or 15 November 2019. The Ministry kept the content of the talks secret; it is also said that no minutes were taken after the November meeting [2]. This circumstance is even more controversial since BaFin, under its Chairman of the Board of Directors, Kukies, even for formal reasons alone, should have continued to keep Wirecard under observation.

The entry into the Chinese market

That November 5, 2019 Wirecard had a strategically important success: its entry into the Chinese market. As announced by the Bavarian company, in fact, just that day, an agreement had been reached for the acquisition of the Chinese payment processor AllScore Payment Services, initially at 80%; the remaining 20% would be acquired two years later. The full acquisition was only possible after Beijing, during a visit by Finance Minister Scholz in January 2019, confirmed that as part of the initiative for the "German-Chinese Financial Dialogue" it would welcome German companies "into the Chinese payment services market" - a step towards further opening up China to foreign investment, as repeatedly requested not only by the German government. [3] It is even more noteworthy that the German side has started to deepen economic cooperation through a company whose activities are now considered one of the most serious cases of fraud in the history of the German economy and which, moreover, has taken over a Chinese company already targeted by the Chinese authorities because of numerous illegal transactions, in particular because of the handling of gambling payments, which is prohibited in China. As a result, AllScore Payment Services was condemned in April to pay the biggest fine ever imposed in the sector to date, amounting to USD 9.3 million [4].4 Why the Wirecard scandal could become a complicated affair for the Berlin government

Accompanied by the Chancellery

On the German side, the agreement had been concretely prepared not only by the Ministry of Finance, but also by the Berlin Chancellery Office (Kanzleramt) - on the initiative of a former Federal Minister, now active as a lobbyist: Karl-Theodor zu Guttenberg, who had already served as Federal Minister of Economic Affairs in 2009, and from 2009 to 2011 as Federal Minister of Defence, and who is currently head of the consulting firm Spitzberg Partners in New York, which he founded. According to press reports, Guttenberg's colleague at "Spitzberg Partners", Urs Gatzke, who was responsible for the Washington office of the Hanns-Seidel-Foundation (CSU) from 2004 to 2013, had asked the Ministry of Finance by telephone and e-mail to inform the responsible government offices in Beijing of Wirecard's interest in entering the Chinese market. The request, it is said, was granted in June 2019 by Secretary of State Wolfgang Schmidt, Scholz's "closest confidant". [5] On 3 September 2019, just before a trip by the German Chancellor to the People's Republic, Guttenberg had discussed it personally with Angela Merkel. Subsequently, he informed Merkel's closest economic advisor, Lars-Hendrik Röller, by e-mail about the planned entry of Wirecard into the Chinese market and asked for "accompanying measures" [6]. In the meantime, the Federal Government admitted: 'the Chancellor raised the issue of the acquisition of AllScore by Wirecard during her trip to China'. On 8 September, after the Chancellor's return, Röller had written in an e-mail to Guttenberg, according to a government spokesman, that "the matter" had been "raised during the visit to China" and "further accompanying measures" had been taken [7].

Evidently informed

The Chancellery was evidently aware of the serious accusations made against Wirecard, accusations that had already led to investigations by a public prosecutor's office, not in Germany, but in Singapore; and Singapore is one of the countries where Wirecard had freely chosen to park its billionaire balances on credit, completely invented balances. On August 13, the Chancellery had also received a request from its former official Klaus-Dieter Fritsche, in which he - like Guttenberg, active as Wirecard's lobbyist - asked for an appointment to discuss the company in Aschheim. The Chancellery had then requested more detailed information about Wirecard from the Ministry of Finance, which he received by e-mail on 23 August [8]. In this e-mail, the Ministry of Finance also referred to 'already publicly known allegations against the company', confirms a government spokesman. The documents received by the Chancellery as an attachment to the e-mail of 23 August referred, among other things, to 'allegations of money laundering and market manipulation' - which, however, were not an obstacle for Röller and Merkel in paving the way for Wirecard to enter China.

Secret Service contacts

There are many questions still open about Fritsche's role in the affair. From 1996 to 2005, he was vice-president of the Federal Office for the Protection of the Constitution (Bundesamts für Verfassungsschutz, BfV), before becoming secret service coordinator at the Chancellery at the end of 2005; at the end of 2009 he then moved on to the Ministry of the Interior as state secretary, before returning to the Chancellery at the beginning of 2014 - now as commissioner for the federal secret services. He held this post until his retirement in March 2018. It is also said that Jan Marsalek, the alleged mastermind behind the Wirecard fraud, had intensive contacts with the secret service. In this regard, Stephan Thomae, Vice-Chairman of the FDP parliamentary group in the Bundestag and member of the Parliamentary Control Committee (PKG), responsible for the secret services, asks that "in this context" the "role" played by Fritz in the case also be "discussed". [9] Thomae calls for a special meeting of the PKG to that end.

FPÖ and the defence of the constitution

It is known that Fritsche was hired by the Austrian Ministry of the Interior at the beginning of 2019 under the leadership of the then Minister Herbert Kickl (FPÖ) as an advisor to carry out the "development" of the Austrian Office for the Defence of the Constitution [10]. At the same time, Marsalek reportedly not only knew the former party leader Heinz-Christian Strache, but also met his then intimate Johann Gudenus several times and had close contacts with the FPÖ. During Kickls' tenure at the Austrian Ministry of the Interior, Marsalek had also promoted a project; press research identified him as a liaison man who intercepted information from the Austrian Office for the Protection of the Constitution and passed it on to the FPÖ.[11] It has not yet been clarified, however, whether Marsalek also had contacts with Fritsche.

[1] S. dazu Der Fall Wirecard.

[2] Tim Bartz, Anne Seith, Gerald Traufetter: Finanzministerium sprach mit Wirecard-Chef über brisante Sonderprüfung. spiegel.de 15.07.2020.

[3] Joint Statement of the 2nd China-Germany High Level Financial Dialogue. Beijing, 18.01.2019.

[4] Zhang Yuzhe, Guo Yingzhe: Central Bank Imposes Another Record Penalty on Payment Provider. caixinglobal.com 08.05.2020.

[5] Der Mann, der vieles wusste. spiegel.de 24.07.2020.

[6] Eckart Lohse: In die Offensive. Frankfurter Allgemeine Zeitung 23.07.2020.

[7] Sven Becker, Rafael Buschmann, Nicola Naber, Gerald Traufetter, Christoph Winterbach, Michael Wulzinger: Kanzleramt setzte sich für Wirecard ein. spiegel.de 17.07.2020.

[8] Eckart Lohse: In die Offensive. Frankfurter Allgemeine Zeitung 23.07.2020.

[9] FDP beantragt Sondersitzung des Geheimdienstausschusses. spiegel.de 24.07.2020.

[10] Stefan Buchen: Rechtsabbieger: Der neue Job von Merkels Geheimdienstmann. daserste.ndr.de 07.03.2019.

[11] Anna Thalhammer: Flüchtiger Wirecard-Manager war geheimer FPÖ-Informant. diepresse.com 09.07.2020.

Marcel Fratzscher - The real reason for the deep social inequality in Germany

The great German economist Marcel Fratzscher, director of the prestigious DIW in Berlin, on Die Zeit explains why social inequality in Germany is so extreme. From Die Zeit

The distribution of private assets in Germany is much more uneven than in other countries. In the previous commentary I spoke about some recent data which show us that in Germany the real wealth of millionaires is much higher than previously thought and that consequently the overall inequality in the distribution of assets is also much higher than previously assumed. What makes the distribution of wealth so unusual in Germany is the fact that very many people have little or no savings, or even find themselves in a situation of net debt. And for this reason they must necessarily rely on the welfare state. They have relatively little personal responsibility and little room for manoeuvre for themselves and their families - especially now, in the crisis caused by the coronavirus. But is this high inequality in terms of assets a problem? And for whom? To answer, we need to know more about the distribution and nature of this wealth.

There are just under a million millionaires in Germany, which is about 1.5% of all adults in the country. At the other end, there are around 16 million citizens who have no net savings or are even in debt. Is that fair? Many studies show that we Germans associate social justice primarily with achievements and adequate satisfaction of needs. By contrast, the vast majority of Germans would not consider a uniform distribution of assets or income to be fair. This means that many would consider a high level of wealth to be fair, if this is essentially due to the performance and merit of the individual.

A new study by the Berlin DIW shows that millionaires in Germany have six common basic characteristics: they are unusually often male, middle-aged or older, have no migration background, come from West Germany, are well educated and often work on their own. Three of these characteristics are very compatible with the principle of merit: if people strive to achieve a good level of education and training and run the risk of starting their own business (most of those who try then fail, often more than once), then the assets will be the result of individual performance. Moreover, the fact that people can only accumulate a fortune in middle age or old age would seem logical and in itself not unfair.

There are 3 other characteristics that are problematic. Because there is absolutely no good reason why gender, geographical origin or migration background per se - if you leave out all other relevant influencing factors such as education - should influence wealth or income. There are many scientific studies showing that these three characteristics also play a decisive role in the labour market. But the most important reason for the great wealth differences in Germany is another: inherited wealth.

Inheritances in contradiction to the principle of merit

More than half of all private wealth in Germany today has not been earned or created with one's own hands, but is the result of inheritance and donations. And this contradicts the principle of merit (and of course the principle of necessity). In fact, only a little more than one person in three inherits a fortune.

It is mainly millionaires who have inherited a large part of their assets, usually in the form of corporate and real estate. Two-thirds of inheritances from companies transferred tax-free go to male heirs, only one-third to female heirs. 41 % of the millionaires' assets are real estate, 43 % are business assets. On the contrary, people with few assets usually do not own a house, have few savings on their account and perhaps not even a car. Adults in the lower half of the wealth distribution in Germany have on average a net wealth of around 3,600 euros.

For many, an inheritance is a great fortune. It means security, it opens up new professional opportunities or the possibility of continuing old family traditions. Especially for younger families in big cities, an inheritance is sometimes the only chance to afford a good apartment in a good location. It is therefore not surprising that surveys clearly show that many Germans are against an increase in inheritance tax.

However, two fundamental problems arise here. On the one hand, large inheritances pay significantly less inheritance tax than relatively smaller ones. In the case of inheritance, moreover, business assets are mostly not taxed. This also explains why, before the inheritance tax reform, Germans with more than €20 million in inheritance paid less than 2% inheritance tax, while people with an inheritance of up to €500,000 paid more than 10%.

Inheritance tax reform may have reduced this problem somewhat, but it is far from being solved. Sooner or later the issue of inheritance tax will become the bone of contention in the German political debate. A radical simplification of inheritance tax, for example a 10% tax on all assets, after the necessary exemptions, and without exception, would be a wise solution that would probably be perceived by society as fair.

The second fundamental problem is that many people with low incomes, little education and few opportunities are not fortunate enough to be able to collect an inheritance, but are completely dependent on the social security system of the state. The welfare state, however, is an insurance policy that protects people from risks such as illness or unemployment, not a tool for people's development.

The central problem: the lack of equal opportunities

If inheritances are so important, then why shouldn't all people be lucky enough to receive an inheritance? The idea of an inheritance as an opportunity for life, which I picked up on some time ago in this column, would give every young person an inheritance of EUR 30,000 on completion of their education. This money could then be used freely by anyone, for example for a career change, a period of leave from work to take care of relatives or other socially important tasks.

The lack of social justice perceived by many people in Germany is not so much about the fact that so few people own so many assets, but that many have so little. The central problem is and remains that there are no equal opportunities: during their working life, many people do not even have the opportunity to build up a small fortune and to plan their lives beyond the help of the welfare state. Yet money and independence, as I will show in my next commentary, undoubtedly make people happier.

Clemens Fuest - 6 possible scenarios for the Italian public debt

Is it possible to secure the Italian public debt? Clemens Fuest, director of the prestigious Ifo Institut in Munich, answers. On Focus he tries to analyze 6 possible solutions for the long-standing problem of Italian public debt. Clemens Fuest from Focus.de 

The causes of Italy's high public debt are many, and all show a rather weak link with a frivolous budgetary policy.

There are several possible options to solve the problem of Italy's public debt, ranging from debt reduction, to asset tax, to exit from monetary union. But they all have disadvantages.

That is why it is likely that there will be strong tensions within the eurozone in the coming years.

The European debate on the economic situation, both in the crisis caused by the coronavirus and after the Eurocrisis, has always focused on the level reached by national public debts, public debt spreads and the consequences of a fall in government bond prices for Italian banks, which hold a significant share of these bonds.

Often in this debate, one gets the impression that Italy has found itself in financial difficulties only because of a rather frivolous debt policy. In reality, Italy's public debt is more a symptom of the country's economic difficulties than its cause. Where the real Italian problems lie becomes immediately clear if you take a look at the trend of Italian economic growth over the last four decades.

Italy is still suffering from the financial crisis.

The figure compares the trend of economic growth in France, Germany, Italy and the United Kingdom since 1980. Until the mid-1990s the economic development of these four countries was quite similar. After that, things changed radically.

In Germany, the pace of growth has slowed down in the meantime. The country had to bear the burden of reunification. Germany also entered the European Monetary Union with an overvalued currency. In Italy, however, growth continued to slow down in subsequent years. Until about 2005, Italian economic output followed roughly that of Germany. But then after the collapse due to the global financial crisis, Italy never recovered. While all the other countries considered here in the last ten years have returned to growth, the Italian economy has stagnated.

The reasons for this chronic weak growth have been discussed at length. The factors mentioned are manifold:

- The reforms of the education system in the 1970s and 1980s are often cited as a possible cause of low productivity.

- The emigration of talent has also weighed on growth.

- The judicial system works so slowly that contracts are often not applicable.

- China's entry into world markets since the 1990s has put Italian products under greater competitive pressure than those of other economies.

- The inefficient decision-making processes of family businesses are responsible for the fact that many of them have been unable to react to structural change. Moreover, the regulation of the labour market makes it difficult for companies to grow beyond a certain size.

- Some blame Italy's entry into the euro. It would have prevented Italy from devaluing its currency on a regular basis, as was previously the case.

- Still others point out the lack of reforms in economic policy during Silvio Berlusconi's governments.

- The fiscal policy implemented after the euro crisis, in particular the rapid return to a restrictive fiscal policy driven by financial market pressures and lack of public investment, would have hampered the economic recovery.

- Shortly before the crisis caused by the coronavirus, the conflict between the Five Star Coalition Government - Northern League and the European Commission about the budget deficit has put investors and consumers in crisis and weighed on economic development.

All these factors, presumably, have contributed to Italy's poor growth. It is a mixture of unfortunate circumstances and omissions on the part of political and economic decision-makers. Italy is entering the crisis caused by the coronavirus with a further growth in public debt compared to the level reached during the last economic crisis. The basic question is whether the country will be able to overcome the crisis by maintaining economic and financial stability in the coming months and years.

Six scenarios appear possible with regard to the development of Italian public finances:

1 - Stabilization of public debt at a high level with a slow reduction of the public debt/GDP ratio

It is theoretically possible that Italian fiscal policy could increase public spending during this crisis in order to stabilize the country's economy, while at the same time bearing the drop in tax revenue caused by the crisis. According to current forecasts, this would bring the public debt ratio to around 155 % of GDP. As long as interest rates on Italy's public debt remain low and creditors are willing to refinance the maturing public debt, the country will be able to live with high levels of public debt. In order to reduce this debt ratio significantly before the next crisis, economic growth in Italy will have to increase significantly. For the debt ratio to reach the level recorded before the coronavirus crisis by 2030, economic growth will have to be two percentage points higher than in recent years, with realistic primary surpluses. This would be a very optimistic scenario. This can only be achieved if the country implements far-reaching structural reforms and prioritises investment over consumer spending in its fiscal policy.

2 - Debt cut-off

It would be risky, but still conceivable, to reduce the Italian public debt by restructuring it. In order to assess the consequences of such a debt restructuring it would be important to understand who are the creditors of the Italian State. Italian households have a high level of savings. Italy is considered to be a country whose public debt is mainly held by its citizens. On closer inspection, however, this is only partly true. The structure of the Italian State's creditors in 2019 was analysed by Gros (2019).

In 2019 Italy's total public debt amounted to approximately €2,250 billion. Italian banks are by far the largest creditors. They have granted direct loans to the Italian government for EUR 290 billion and also hold Italian government bonds for a further EUR 400 billion. Italian households directly hold EUR 100 billion worth of government bonds. There are also investment funds and insurance companies with a predominantly Italian clientele. Foreign banks hold 450 billion euros in Italian government bonds. The Bank of Italy holds another 400 billion euro in securities, mainly as part of the ECB's securities purchase programmes. These bond holdings will continue to grow even during the post-Corona crisis. In principle, the Bank of Italy would be liable for defaults on these bonds. However, purchases of Italian government bonds by the Italian Central Bank generate liabilities to the rest of the Eurosystem within the so-called Target balances. It can therefore be assumed that the risks of this stock of bonds are ultimately borne by the foreign creditors. While a zero interest rate is currently applied to the Target liabilities, the proceeds from the assumption of this risk therefore remain in Italy.

In the event of a debt cut of, say, 50 %, most Italian commercial banks would have to be recapitalised, as losses of EUR 345 billion would occur. And this could only be done by drawing on a substantial part of Italian citizens' deposits and savings. It remains to be seen to what extent this could be compatible with European legislation on deposit insurance. Because of the losses on government bonds, investment fund shares and insurance directly held, there would be a further €350 billion of losses for Italian households. It is difficult to imagine that any Italian government would be willing to put savers in such a situation. Its re-election would undoubtedly be impossible.

It would also be difficult to persuade the European partners to cancel half of the Target loans to the Bank of Italy. It also seems difficult to expect foreign banks to incur losses of EUR 225 billion.

3 - A one-off wealth tax on Italians

Italy is often asked to reduce its public debt by applying a one-off tax on assets. In January 2014, the Bundesbank had already presented the concept of a one-off wealth tax as a means of avoiding the bankruptcy of the Italian state. The disadvantages and risks associated with wealth taxes, in particular the risk of capital flight, normally play against wealth taxes. However, situations are conceivable in which, in the absence of better alternatives, using this instrument might make sense: "In the exceptional situation of imminent State insolvency, however, a one-off levy on assets might have more favourable effects than the other options still possible".

However, such an asset tax would raise many problems. If it included movable assets, for example, it would lead to a capital flight. This would exacerbate the Italian economic crisis even further. Since large assets are often linked to companies, the tax would end up burdening companies that would have to invest and create jobs. To avoid capital flight, the tax could be limited to real estate. In that case, however, it would have to be proportionately higher. From the point of view of fair burden-sharing, however, it would be difficult to negotiate a cancellation of public debt exclusively at the expense of property owners.

4 - Shift the debt to other member states

It would theoretically be possible for the other member countries of the eurozone to relieve Italy of part of its public debt. The citizens of the other eurozone states, however, would never accept a direct redistribution of debt. It would therefore be conceivable for the other Member States to grant very long-term loans at interest rates close to zero, similar to those granted to Greece, for example, through the ESM. As long as these loans can be refinanced at an interest rate close to zero, there would be no problem. Creditor countries, however, may feel that there is no room for manoeuvre to borrow more, at the latest during the next economic crisis.

A generally used argument against shifting Italian public debt to other European countries is that Italian households often have relatively high levels of wealth. The graph shows that, although average net wealth is slightly lower than the eurozone average, it exceeds the wealth of Dutch and Finnish households, for example. It is difficult to imagine that in a country where households have lower average private wealth, they are then willing to ease the burden of the public debt of a country whose citizens are on average richer.

5 - Debt relief through the ECB

From time to time some people suggest that the problem of Italy's public debt should be solved by the central bank, which should buy most of the bonds and refinance the country. There are even calls for the central bank to waive interest payments and cancel the bonds. The proposal to eliminate public debt through the definitive transfer of government bonds to the central bank is as convincing as the famous lies of the Baron of MÃŒnchhausen. It is forgotten that the central bank's profits are still due to the state. If the Italian central bank, with the approval of the ECB, were to buy government bonds and issue them in exchange for money, this would create a central bank profit that would have to be transferred to the Italian government. If the central bank were to buy more government bonds, there would be less room, for example, to buy corporate bonds, given the total money supply. The interest income on these corporate bonds will consequently be lower. The plan to forget the public debt in the basements of central banks only works if you believe you can expand the money supply at will. But this is not possible. Anyone who tries to do so will cause monetary devaluation and inflation.

6 - The exit from the euro and the reintroduction of the national currency

The coalition government between the Five Stars and Lega Nord at the beginning of its mandate was openly discussing a possible exit of Italy from the Eurozone. This was accompanied by the idea that in this way Italy could get rid of much of its public debt by switching to a new national currency. The practical consequences of such a changeover - political and economic destabilization of the country and unpredictable legal disputes - however, make this option very unattractive. This is true for Italy and for the rest of Europe.

There is no simple solution

This brief discussion on possible scenarios for the future development of Italy and Italian public finance shows that there are no easy solutions to the problem of the country's high public debt. It is very likely that Italy will be financially supported by the Eurozone countries in order to guarantee the country access to capital markets at a low interest rate. The high level of public debt and the consequences of the post-Crown crisis for the private sector will put a strain on economic development, making it difficult for the country to emerge from a situation of excess debt. In the next economic crisis, over-indebtedness will be difficult to avoid.

The underlying political problem is that there will always be a strong temptation on the part of the governments in office to present over-indebtedness problems as merely temporary liquidity problems, postponing their solution by granting aid loans. The consequences will then be addressed by subsequent governments.

All this shows that considerable tensions will have to be expected in the euro area in the coming years. Italy is not the only country facing financial challenges. Much will also depend on whether Europe as a whole succeeds in relaunching its economic downturn as soon as possible. Whether this can be achieved depends primarily on developments in the pandemic and the government measures taken to contain it. The question also arises for European policy makers as to whether joint action at European level is possible to promote and relaunch economic recovery.e 

The country of inequality

According to recent research by the prestigious DIW (Deutsches Institut für Wirtschaftsforschung) in Berlin, both social inequality and the size of private assets have so far been largely underestimated. According to the DIW, the richest 10% of the population in Germany has 67% of private wealth, while the poorest 50% of the population has only 1% of private wealth. The director of the DIW, Marcel Fratzscher, writes about it in Die Zeit.

Until now, it was not known exactly how rich or poor we Germans really were. The German state did not collect public statistics on the wealth of its citizens - and since wealthy Germans rarely took part in representative surveys, it was also impossible to know what private wealth was actually available in Germany. However, a new and more specific survey by the Deutsches Institut für Wirtschaftsforschung, conducted among the millionaires in this country, is changing the situation: the study shows that the wealth of the wealthiest Germans so far has been grossly underestimated.

In Germany, for example, the total wealth available to citizens is not 8.2 trillion euros, as previously assumed, but more than 10.3 trillion euros. The difference of about EUR 2.1 trillion is equivalent to about two thirds of Germany's annual GDP.

Not surprisingly, people with very high net worth are also reluctant to be interviewed about their wealth, especially since in Germany being rich is usually seen as something negative. The rich are therefore very reluctant to reveal their actual wealth. And they are even less inclined to take part in surveys on the subject. Because of this, our usually very representative socio-economic household survey, i.e. the socio-economic panel of the DIW in Berlin - for which almost 30,000 people in over 20,000 households have been interviewed every year since 1984 - has always had the disadvantage of being able to identify too few people with high net worth and thus to detect their wealth.

My colleagues Carsten Schroeder, Charlotte Bartels, Markus Grabka, Johannes Keunig and Konstantin Goebler have managed to correct this situation. Using a database containing information on the ownership structures of companies, they identified people living in Germany who hold significant shares in at least one company worldwide and asked them if they could interview them. Not all persons with a high level of ownership agreed to be interviewed. But they were large enough to have a representative picture of private wealth in Germany for the first time. In fact, the new dataset also includes 700 Germans with a wealth of over 250 million euros, according to Manager Magazin's list of wealthy people.

Two-thirds of the wealth apartien to 10% richest

The results are very interesting: total private equity - consisting of real estate, financial assets, life insurance, corporate assets and consumer durables such as cars, after deduction of liabilities - is not only at least a quarter higher than was known until now, but is also much more unevenly distributed: the richest 10 % does not own 59 % of total equity, as previously assumed, but holds 67 %. Above all, the top 1% of the distribution is considerably richer than previously thought: instead of the previous estimate of just under 22%, these few individuals, with just over 35%, own more than a third of the total private equity.

In comparison, the poorest 50 % of the population owns only about 1 % of private equity. Expressed in concrete numbers, this means that an average millionaire has an average net worth of around €3 million. Conversely, an average citizen in the lower half of the distribution has an average net worth of €3,682. More than one person in four has practically no net assets or is even in debt.

In an international comparison, the inequality in the distribution of private assets is therefore unusually high. In Europe, Germany is one of the countries with the most unequal asset distribution. The Gini coefficient, a measure commonly used to measure inequality in wealth distribution (a value of zero means a uniform distribution of wealth, a value of 1 a maximum inequality), with the additional data reaches 0.83, and is even higher than it was before (0.78).

Is this right?

Now there will be a heated debate about whether this inequality is right or wrong, economically advantageous or harmful, socially balanced or socially unbalanced - and this will be the focus of the next comment. What is worrying, however, is that so many people in Germany have so few assets and are therefore exposed to great risks, especially in the current coronavirus crisis. Already today, many people with low incomes and low assets have had to draw on a significant proportion of their savings. People on low incomes and with few savings have been particularly affected by the crisis. Their proportion among the almost ten million men and women who have lost their jobs or had to work short hours is disproportionately high.

It should therefore come as no surprise to us that many people are not spending the children's bonus (Kinderbonus) but prefer to save, and choose not to consume despite possible savings from reduced VAT. For people with very high wealth and income, however, these additional transfers from the state make no difference to their consumption behaviour, as they could have financed them even without the transfers. This shows once again that high inequality in terms of income and wealth is a further obstacle to economic recovery, especially in times of crisis like these.