31 May 2011

A torrent of mortgage defaults: A possible effect of the eurozone debt crisis

Angelo Fiorante

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This ECRI Commentary takes a closer look at the mortgage situation of households in Portugal, Italy, Ireland, Greece and Spain – countries whose economic condition have been under the magnifying glass throughout the eurozone debt crisis. The credit markets in these countries have witnessed fast-paced development, with the credit extended to households having increased considerably during recent decades. What will be the impact on average citizens when they start to feel their belts tightened as a result of their government’s insolvency or liquidity problems? A torrent of mortgage defaults may follow the euro debt crisis, if appropriate measures are not taken to both resolve the sovereign debt crisis and protect borrowers’ ability to repay their loans.