Wipeout
Europeans hold about 43 percent of their financial assets in shares or funds that may include equities, compared with about 70 percent of U.S. citizens' assets, according to the Paris-based European Savings Institute. In Japan, the figure is 21 percent.
Consumer spending in Europe is less dependent on stocks than in the U.S., where the Federal Reserve estimates that tumbling markets wiped out $6 trillion in household wealth since their peak. The proportion of European households that own shares is now about 20 percent, compared with about 50 percent in the U.S., according to Goldman Sachs estimates.
Such ownership is rising. In Germany, Europe's largest economy, one in five individuals now own shares either directly or through funds, compared with one in 10 in 1998.
Germany's Neuer Markt Index fell 87 percent since its record in March 2000, wiping out about 200 billion euros in market capitalization.
``In the past few years, there's been a lot of enthusiasm for the market, which attracted a lot of small Italian investors,'' said Alessandro Bovo, who helps manage 500 million euros at Banca Popolare di Verona Scrl in Verona. ``They are the ones whose spending habits this slump has affected the most.''
In May, French consumer spending had the biggest drop since 1999. A month later, Italian confidence slumped to the lowest in two years.
No Fooling
Some Italians are returning to the safety of government bonds, even though two-year notes yield about 4 percent -- a fraction of returns of more than 10 percent that made them popular in the late 1980s and early 1990s.
``There won't be much money flowing back into the stock market anytime soon,'' said Francesco D'Andrea, a civil servant in Rome who sold his remaining shares last year after losing $40,000 on companies like Enel SpA. ``You can fool people once, but you can't fool them twice.''
Stocks fell in Europe today as Merck & Co. became the latest U.S. company to report irregularities in its earnings, saying it included $14.1 billion of revenue it didn't have. The Stoxx 50 Index fell 1.4 percent to 3044.5.
Tailspin
``We are watching the market going into a tailspin and are powerless,'' said Gerard Gerardin, who represents 4,200 French investors at annual meetings of Vivendi Universal SA and other companies. His own investments, which include Vivendi and Alcatel, are down 40 percent.
Some investors have already pulled the plug. Take Martin Herrchen, 40, a magazine editor in Frankfurt. He finally sold his stocks after they fell as much as 70 percent.
Herrchen was thinking about taking a holiday in Northern Italy's Lake Maggiore or somewhere in France. As markets sank, he opted for Munich instead. ``We aren't traveling as far as we used to,'' he said.
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