The cost of security in financial investments will be very high in the euro zone

Euro-zone households have a strong preference for security in their financial investments. In the period 1982-2019 when long-term interest rates fell, the cost of this preference for security was low since the return on government bond portfolios was high thanks to capital gains ( 5.5 percentage points per year lower than on listed shares). But in a period of very low and then probably rising long-term interest rates (2019-2030 and perhaps beyond), the return on government bond portfolios will remain virtually zero, far lower than the return on equities and more generally on equity investment. The cost of security for savers in the euro zone will become very high.