European consumers are stockpiling savings as a way to be prudent during the pandemic, but that isn’t having a positive effect on the country’s lagging economy.
Bank deposits rose sharply in the last few months in several large European economies, including France, the U.K., Spain and Italy, according to analysis from the European Central Bank and The Bank of England.
In France, consumers put away €20 billion in March, a sharp upswing from the usual average monthly deposits of €3.8 billion. And data from the Banque de France show total savings of more than €60 billion higher than pre-pandemic, signaling that people are being as cautious as possible with their funds during the pandemic.
Italian banking customers put away €16.8 billion in March, a rise from the usual amount of €3.4 billion per month, while Spanish customers were depositing €10.1 billion, a shift from the usual amount of €2.3 billion. U.K. customer deposits hit a record high at €13.1 billion in March, analysts reported.
In Germany, the trend was the opposite, reflecting people’s predilection toward keeping cash savings during times of crisis. Rather than flocking to deposit their money, German banking customers were withdrawing their cash from the bank. The German central bank reported that between late January and early May, cash circulation spiked €39.7 billion.
This kind of thriftiness is dampening hopes for an economic recovery, as experts with the European Commission now say collapsing investments combined with rising unemployment could make the downturn the worst since the Great Depression of the 1930s.
Italy’s economy is expected to plummet 9.5 percent; Greece is also in dire straits with an even worse fall. Germany, usually a powerhouse, will likely see a 6.5 percent decrease.
Melanie Debono, an economist with Capital Economics, said people are likely to see improvements in their bank accounts due to “involuntary savings” while everything was shut down.
But that won’t go hand-in-hand with the economy, where businesses in fields like new car sales, holiday travel and restaurants are likely to see shortages in revenue as people avoid going out or spending money.
“Many will be reluctant to spend as freely as they did in the past because they will be wary of crowded places, public transport and foreign travel,” she said, according to the Financial Times.