10 May 2012

Where is the European household sector in the deleveraging cycle?

Angelo Fiorante

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One of many uncertainties still hanging over Europe’s economic recovery in the hostile post-crisis economic environment is how the household sector will cope with the debt reduction being sought. As a decade-long trend of generous credit expansion goes into reverse, deleveraging in the household sector moves forward, but the trend is far from homogeneous across nations. It is expected that household deleveraging will take time and that it will require continued policy support to prevent an abrupt retrenchment from debt, which could obstruct countries’ recovery.

Angelo Fiorante is Research Assistant at the European Credit Research Institute at CEPS.