In the May economic update video for eZonomics, ING senior economist Teunis Brosens explains how levels of private debt the United States and the Eurozone have moved in different directions since 2007.
Grappling with the debt “hangover”
Brosens said the United States “made good progress” in lowering household debt as a percentage of disposable income built up in the pre-crisis boom from 130% in 2007 to 106% in 2013.
In contrast, the percentage in the Eurozone rose from 93% in 2007 to stabilise at 100% in 2013.
Brosens said the US debts were being repaid and restructured and, importantly, household incomes had increased.
“The US is literally growing out of its debt problem,” said Brosens.
Lesson for Europe
Brosens says there is a clear lesson for Europe.
Repaying and restructuring can help to reduce household debt “but the best way to lower the debt burden is by spurring economic growth”.