Sectoral Deleveraging in Europe and Its Economic Implications

Gächter, Martin and Geiger, Martin and Glötzl, Florentin and Schuberth, Helene (2015) Sectoral Deleveraging in Europe and Its Economic Implications. In: Focus on European Economic Integration. Oesterreichische Nationalbank, Wien. pp. 8-23.


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We examine net lending/net borrowing and the underlying debt dynamics at the sectoral level in the European Union. Saving and investment patterns indicate that there have been considerable deleveraging efforts since the start of the global financial crisis, particularly in the nonfinancial corporate and household sectors. In many EU countries, however, this decline in credit transactions has not yet led to a significant reduction of sectoral debt-to-GDP ratios. Subdued output growth and low or even negative inflation rates have undermined the deleveraging process and increased real debt burdens in a number of European economies. Since these are often the countries that had experienced strong credit booms prior to the crisis, rebalancing needs are likely to persist and may be a significant drag on the recovery in the near future. Furthermore, most of the ongoing rebalancing - both in terms of debt levels and current account deficits - is based on a sharp decline in investment rather than an increase in saving, which might lead to lower potential growth in the future. Recent developments may even jeopardize the catching-up process of peripheral euro area countries and non-euro area EU Member States in Central, Eastern and Southeastern Europe.

Item Type: Book Section
Additional Information: This publication presents economic analyses and outlooks as well as analytical studies on macroeconomic and macrofinancial issues with a regional focus on Central, Eastern and Southeastern Europe. May be reproduced for noncommercial, educational and scientific purposes provided that the source is acknowledged. Provided here by courtesy of the publisher.
Keywords: balance sheet recession, financial accelerator, credit crunch, investment
Classification Codes: JEL E22, E24, E44, G21, G31
Divisions: Departments > Sozioökonomie
Version of the Document: Published
Depositing User: ePub Administrator
Date Deposited: 25 Apr 2018 10:18
Last Modified: 04 May 2018 12:36
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