Debt, Assets and Imbalances in the Euro Area: An Aggregate View

Abstract

The recent developments in the euro area have shown how important it is that the various economic sectors pay attention to their financial positions, and particularly to the sustainability of their debt levels. The attention usually focuses on the government sector. Despite the Maastricht Treaty and the Stability and Growth Pact provisions, many euro area governments have not succeeded in reducing their gross debt to a level that can be considered sustainable, inter alia in the light of the financial crisis and the rising costs of population ageing.

The views expressed in this chapter are those of the author and do not necessarily reflect those of the National Bank of Belgium. I am particularly grateful for comments from and helpful discussions with Hugues Famerée, Hans Geeroms, lvo Maes, Marc Maréchal and Vincent Périlleux. The chapter furthermore benefited from presentations of earlier drafts at the ECB flow-of-funds workshop in November 2011 and at a Lisbon Methodology (LIME) Working Group meeting at the European Commission in January 2012.