Europeans Are Scared to Spend, and Economy Suffers

“Matej Macak, a materials engineer in the Czech Republic, recently came to the conclusion that he has a money problem. He is afraid to spend it.

 

The 24-year-old stopped buying sneakers, which he used to like collecting, and fretted over small purchases like a phone charger. Macak has been saving aggressively -- usually more than half his income -- but worries he has taken it too far.

 

"I've been looking at some Jordans, but then I thought that maybe it's too much, maybe I should save it instead," he said. "I realized that I buy less stuff than when I had less money."

 

Europeans have doubled down on frugality in recent years -- another economic headache for the Continent. Consumers' reluctance to spend is a key reason why Europe has lagged behind the U.S., where robust spending especially among higher-earners has driven growth. European companies that make some of the most coveted products in the world -- luxury handbags, watches, clothes -- now depend heavily on U.S. and Asian consumers for growth.

 

While Americans often have no problem maxing out credit cards, frugality is deeply ingrained, particularly in northern parts of the European Continent.

 

People around the world are feeling the sticker-shock of higher prices, but recent inflation has taken a larger psychological toll on Europeans. More than three years after inflation peaked, consumers are still saving more and spending mostly on essentials, according to transaction data analyzed by Visa. The resurgence in inflation sparked by the war in Iran threatens to deepen the consumer malaise.

 

Household consumption has risen 5.5% in the eurozone and 2% in the U.K. since 2019, compared with 18% in the U.S., according to inflation-adjusted data from the Organization for Economic Cooperation and Development.

 

It isn't that Europeans, on average, don't have money. Real disposable incomes, which adjust for inflation, are 8% higher in the eurozone than before the pandemic. If households were to return to their prepandemic saving levels, eurozone gross domestic product would be 1.3% larger, said Marieke Blom, chief economist at the Dutch bank ING.

 

Measures such as tax cuts could help bolster spending, but many governments are constrained by high debt levels, defense investments and aging populations.

 

Eurozone households saved about 15% of their disposable income last year, compared with roughly 12.5% before the pandemic. In the U.K., the savings ratio is nearly twice as high as before the pandemic. Americans' savings rate, meanwhile, has dropped well below prepandemic levels.

 

Some Europeans, especially younger ones, say they are worried government pensions won't be able to support them in the future as aging populations strain welfare systems.

 

Many Europeans would be better off investing more in financial markets like Americans do, economists say. Channeling part of the trillions of euros sitting in households' bank accounts into more-productive investments would also help the economy, economists argue.” [1]

 

1. World News: Europeans Are Scared to Spend, and Economy Suffers. Dulaney, Chelsey.  Wall Street Journal, Eastern edition; New York, N.Y.. 24 June 2026: A6.