Private Debt Is the Problem
John Deutsch International Development Discussion Paper, Queen's University, DDP 2017-17
6 Pages Posted: 30 May 2017 Last revised: 7 Aug 2017
Date Written: May 28, 2017
Given the huge private debt in Cyprus, the risk of a recession is very high because of the compelling need for households and corporations to repair their balance sheets. The Central Bank now admits that it may take 10 years to tackle the huge non-performing loans problem. What they do not realise however, is that there is a deep and long recession that goes with this wait if we choose to do nothing and stay the course of austerity. The paper concludes that rather than staring blissfully down the abyss, the government should be ready and have in place the institutions and provide for fiscal measures which will mitigate and cushion the effects of the coming, but very foreseeable, recession.
Keywords: household dissaving, household debt, middle-class squeeze, tax evasion, debt write-offs
JEL Classification: E21, E69, G29, H26, H31
Suggested Citation: Suggested Citation