Demertzis, Maria , Lehmann, Alexander , (2017), “Tackling Europe’s crisis legacy: a comprehensive strategy for bad loans and debt restructuring”, Bruegel, 24 April
At a current value in excess of €1 trillion, non-performing loans (NPLs) have undermined the recovery in credit and economic growth in the EU since the 2009 financial crisis (Figure 1 and European Commission, 2017). In terms of bank regulation and supervision, the response was initially slow, though is now more decisive. Since 2013, the EU has had uniform standards for bank asset quality, and as of 2017 key euro-area banks will be forced to set targets for NPL reduction and to improve operational capacity to manage the workout (ECB, 2017).
But it is often overlooked that loan delinquency is a symptom of debt distress in the private sector. And debt in excess of sustainable levels is even more widespread than NPL figures would suggest. At least eight countries within the currency bloc suffer from excess private debt on a scale that could potentially undermine their ability to recover sustainably.
Relevant Posts
- Fratesi, Ugo, Rodriguez-Pose, Andres, (2017), “The Global Crisis and regional employment in Europe: The performance of sheltered economies”, VoxEU, 16 April
- Danthine, J. P., (2017), “Subsidiarity: The forgotten concept at the core of Europe’s existential crisis”, VoxEU, 12 April