41-57

• Γεωργόπουλος, Δημοσθένης
• Παπαδόγγονας, Θεόδωρος
• Σφακιανάκης, Γιώργος

In this paper we compare private (and especially household) debt developments in Greece and Spain from 1970 onwards. Debt levels are low and stable until around the mid 1990s (starting from extremely low values in Greece and somehow higher in Spain), while they are increasing thereafter in nearly explosive terms indicating a structural break in the relevant time series. Revealing indications exist that bank deregulation and liberalization are the main causes for debt explosion, following common European rules culminating in the early 1990s. Financial deregulation permitted banks to move promptly and offer a wide spectrum of choices to ambitious (but not necessarily solvent) customers: mortgages, credit cards, consumer loans and so on. Every single step in the process of financial deregulation was accompanied by a higher level of household indebtedness. Moving up from the household level to the macroeconomic level, increased debt had been also a solution to stalling effective demand, possibly due to the recent inverse redistribution of income. However, debt persistence, strongly depicted in this paper, indicates future problems.

• Economics and Business

• Οικονομία
• Finance

private debt, household debt, deregulation , debt persistence, structural break, financial crisis, debt sustainability

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