Link to the University of Pittsburgh
Link to the University Library SystemContact us link
AEI Banner

The debt challenge in Europe. Bruegel Working Paper 2012/02, January 2012

Ahearne, Alan and Wolff, Guntram B. (2012) The debt challenge in Europe. Bruegel Working Paper 2012/02, January 2012. [Working Paper]

[img]
Preview
PDF - Published Version
Download (260Kb) | Preview

    Abstract

    The euro area faces a double challenge: debt overhang and the need for price adjustment. This paper reviews the debt challenges in the household and corporate sectors and maps out some policy options. In particular, we document the increase in private debt prior to the crisis and consider how the corporate and household sectors have adjusted their balance sheets during the crisis. We examine previous experiences with corporate and household deleveraging and draw lessons for policymakers. We show how the macroeconomic effects of balance-sheet adjustments have been in part offset by the use of fiscal deficits, and we discuss the resulting challenges. A key lesson is the importance of maintaining economic growth and avoiding a prolonged doubledip recession in the euro area while facilitating necessary deleveraging in some over-indebted sectors and countries. We also emphasise the need for a growth strategy tailored to southern Europe.

    Export/Citation:EndNote | BibTeX | Dublin Core | ASCII (Chicago style) | HTML Citation | OpenURL
    Social Networking:
    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on and consequences/reforms
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Bruegel (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 20 Feb 2012 09:47
    Number of Pages: 26
    Last Modified: 20 Feb 2012 09:47
    URI: http://aei.pitt.edu/id/eprint/33607

    Actions (login required)

    View Item

    Document Downloads