New macro-debt statistics from Eurostat
from Merijn Knibbe
Today, Eurostat announced that it
“publishes for the first time today the indicators of the Macroeconomic Imbalance Procedure (MIP) Scoreboard … The initial Scoreboard consists of ten economic, financial and structural indicators relevant for the early detection of emerging macroeconomic imbalances at Member State level. To assess internal imbalances, the Scoreboard includes indicators on government and private debt, private credit flow, house prices and unemployment. To assess external imbalances, the indicators cover the current account balance, net investment positions, real effective exchange rates, share of world exports and nominal unit labour cost.”
We should have used these debt statistics earlier. An example: (graph)
And private credit flow is defined as:
“the net amount of liabilities (loans and securities other than shares) which the sectors Non-Financial corporations and Households and Non-Profit institutions serving households have incurred during a year.”
This variable should have been expressed as a percentage of income of these sectors, in stead of as a % of GDP. But never mind – the build up of private debt in countries like Ireland, Spain and Estonia was beyond believe anyway. In Ireland, debt increased with more than 25% of GDP for 5 years in a stretch (as a reference: total government borrowing in the Eurozone is at present not even 4% of GDP…). Mind Italy, however. Not too much borrowing over there.
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Real-World Economics Review Blog 
I find it amazing to see how small the debt build-up in Germany was and nonetheless they ended in the process of debt deleveraging. In contrast, the hiccup in 2002 in the cases of Spain and Estonia is hardly noticeable in the overall picture; a continuous debt explosion from 1995.
Why didn’t the Spanish end in financial deleveraging like the Germans after the dot.com burst? Different mindsets? Cultural differences? Or are debt-to-income and “cost of debt services to income” ratios the keys?
@Olafur:
Spain increased wages, Germany not. In Spain everyone felt good, took a loan and bought a house. In Germany everyone felt bad, didn’t take a loan and didn’t buy a house.
Look at the house prices and you’ll see an 1:1 correlation to the chart above.
Wage increases started the bubble in Spain and afterwards the bubble starts inflating itself.
egghat,
Why did (real) house prices in Germany not increase, while these did increase in almost all surrounding countries (+ 150% in neighbouring The Netherlands)? I’ve been reading around a bit and again and again it turns out that ‘easy credit’ is one of the most important predictors of large increases of house prices. There is, of course, a demand side and a supply side when it comes to house prices, but in this market there is a ‘liquidity’ or ‘financing’ side too. In my country – the Netherlands – people without savings could get 130% mortgages, ‘as prices would continue to increase’. Was this the same in Germany?
There are many aspects of Germany’s economy which need to be understood because it appears to function so much better than its neighbours’. For instance, why is there a lower rate of homeownership? We know that Germany has very strong laws to protect renters. They also appear to have a much more effective local banking system.
Credit and landed property are intimately related because the majority of bank lending has land as collateral.
Existe una matización en el termino deuda privada, en el caso de España incluye los prestamos realizados por las entidades bancarias a empresas constructoras, que representan, en éste caso el 80% de la deuda.