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03 September 2015

CEPS: Sixth year of contraction in European private credit markets, despite a stabilisation on the housing market

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The ECRI Statistical Package 2015 reveals that at the end of 2014, the outstanding amount of the European non-financial private debt decreased in real terms for the sixth consecutive year, both in the European Union as a whole and in the euro area.

However, this does not mean that all EU countries recorded a contraction in non-financial private debt over the same period. While the EU15 countries registered a decrease for the sixth consecutive year in 2014, non-financial private debt in the so-called new member states (NMS countries) contracted only twice over the same period.

In 2014, the total amount of household debt outstanding in the EU28 expanded slightly in real terms for the first time since 2011. However, different patterns can be observed at a more granular level, between the EU15 countries and the NMS countries. Also, real household debt of the countries that were worst hit by the economic crisis continued to shrink in 2014 (Ireland, Spain, Portugal, Greece and Italy). Finally, when comparing different ratios that apply to total household debt, three facts stand out:

- On average, EU28 households were more indebted over the period 2008–14 than from 2001 to 2007

- On average, EU15 countries are a lot more indebted than NMS13 countries.

- There may be a convergence between the NMS countries and the EU15 countries regarding their relative debt, the former catching up the latter.

Considering consumer credit, the growth rate in real terms stabilised in 2014. Nevertheless, this apparent stability does not reflect the big disparities across the EU, in contrast to the housing credit market, where the stabilisation recorded at the aggregate level was distributed more evenly across countries.

Regarding non-financial corporation (NFC), in 2014, the total credit distributed in real terms in the EU contracted for the sixth consecutive year. Also, among the countries that have been the most damaged by the crisis (Greece, Spain, Ireland, Italy and Portugal), it is noteworthy that their courses differed substantially in 2014 whereas they had been similar until then. Turning to the two largest economies of the euro area, France and Germany, the outlook for commercial lending is better to some extent than it has been in recent years, while the UK situation remains problematic.

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© CEPS - Centre for European Policy Studies

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