Spain’s private sector indebtedness: Where do we stand and what are the remaining challenges?

Spain’s private sector indebtedness: Where do we stand and what are the remaining challenges?

Fecha: mayo 2012

Santiago Carbó Valverde, Eduardo Maqui-López, Francisco Rodríguez

Etiquetas: Deuda privada

Spanish and International Economic & Financial Otlook, SEFO, V. 1 N.º 1

While a significant degree of public attention on Spanish imbalances has been devoted to the public debt, Spain does not seem to have a comparative disadvantage relative to its European peers where public debt levels are concerned. However, Spanish private sector debt experienced intense growth in the years prior to the crisis and is now considerably higher than the EU average. This article shows that Spain’s private debt imbalances are significant and correcting them is one of the major challenges for the Spanish economy over the next few years. Private debt has been mainly channelled through banks. As a consequence, current banks’ asset impairment problems – and the resolution mechanisms necessary to address them – will determine to a large extent the way the deleveraging process is conducted. Furthermore, private sector debt imbalances and related banking problems are linked to house price dynamics. Lower house prices and improved housing affordability could be two of the means through which to help Spain to accelerate private sector deleveraging.

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