Young people in Europe are getting poorer than older people. Here's Croatia

The European Central Bank held its key interest rates steady on Thursday, maintaining the deposit rate at 2.5 percent, the main refinancing rate at 2.65 percent, and the marginal lending facility at 2.9 percent. The Governing Council stated that tighter financial conditions implemented since the start of autumn should help curb inflation driven by rising energy costs, although these measures will likely also dampen economic growth. The bank indicated it would reassess policy at its mid-December meeting. This decision came against a backdrop of widening wealth gaps between younger and older generations across Europe, with young households holding significantly less net worth than their elders due to soaring housing and living costs. According to data from the European Central Bank released in 2023, which covered 22 European nations, individuals under the age of 35 possess only 2.8 percent of total household net wealth. In contrast, those aged 55 to 64 hold the largest share, accounting for 24 percent of the total. Net wealth includes real estate, vehicles, savings, and other assets after deducting debts. Households led by persons under 35 have a median net wealth of approximately 25,000 euros, while those led by individuals aged 55 to 64 hold roughly 208,000 euros, a difference of more than eight times. Student protests that began in France in September have spread to over 11 European countries. Young people are protesting high rents, fuel prices, and cuts to public services, with many expressing fear that they will not live better lives than their parents. Rising prices for housing, fuel, and basic necessities are deepening the divide between generations. In Finland, the disparity is particularly acute, with those under 35 owning just 0.8 percent of total household wealth. Low shares for the young are also recorded in Ireland, Austria, Greece, and Germany. Conversely, wealth distribution is more even in parts of Central and Eastern Europe. In Lithuania, those under 35 hold 13.2 percent of total wealth, compared to 15.9 percent for the 55-to-64 age group. Croatia falls into this latter category, with young people holding 12.3 percent of total wealth, a figure significantly higher than in many Western European states. However, experts note that this does not mean young Croatians easily access property or are free from financial pressure. Evelyn Astor of the European Social Observatory warned that real estate prices have risen sharply in both rental and purchase markets. Consequently, ordinary families find it increasingly difficult to pay rent or buy homes, while wealthier individuals can more easily invest in property. Financial pressures are further compounded by increases in food, energy, transport, and household expenses. In the eurozone, Hungary, and the Czech Republic, consumer prices have risen by a cumulative 67.2 percent since 2000. Hungary recorded the highest price increase among the countries compared, with prices more than tripling according to Eurostat data. On the monetary policy front, the ECB noted that inflation accelerated sharply in September to 3.8 percent, driven by an 18.9 percent year-on-year jump in energy prices. Fuel prices reached new record levels in September, partly due to higher refining margins. Energy prices rose faster than projected in the bank’s baseline scenario published in September. The Governing Council stated that this will likely support inflation in the short term and keep overall inflation well above the target level for the coming quarters. They expect that slowing energy prices, combined with the effects of higher interest rates, will eventually bring inflation back to the target. The ECB defines price stability as an inflation rate of two percent in the medium term. Christine Lagarde, President of the European Central Bank, stated that due to the increased scope and duration of the energy shock and its secondary effects, cost of living will be higher and growth lower. She affirmed the council's determination to stabilize inflation at the two percent target. While core inflation, excluding energy and food, has remained largely stable and wages show no specific impact yet, the full effects of the energy shock are still unfolding. The council emphasized that the intensity and duration of the shock, along with indirect effects, will likely push inflation up and slow growth. Tightened financing conditions from the September meeting are expected to counterbalance these forces. Ante Žigman, Governor of the Croatian National Bank, commented that the situation in financial markets has tightened further, visible through rising bond yields and falling stock prices. He described the gradual approach to raising rates as a step in the right direction, positioning the bank well for future decisions. Markets had anticipated the hold, following rate hikes in June and September. Economists generally expected the current pause. There is speculation that another hike could occur in December if inflation fueled by energy prices does not subside. The central bank aims to prevent second-round effects, where high energy costs lead to spiraling wages and prices, entrenching inflation. Separate concerns were raised regarding France, the second-largest economy in the eurozone. Its debt burden has reached a post-war record of 119 percent of gross domestic product. Investor anxiety over the strained fiscal position has pushed up yields on French government bonds, making borrowing more expensive for the state. This adds to the broader uncertainty facing policymakers. The ECB maintained that despite elevated uncertainty, it remains in a good position to navigate the current environment and achieve its inflation targets through monetary policy. The bank continues to monitor the interplay between energy shocks, wage dynamics, and financial conditions to guide its next moves.