Size and dynamics of debt positions in Belgium and in the euro area

The current financial crisis has once again shown that the inherent pro-cyclicality of lending can trigger financial cycles with a potentially substantial impact on the real economy. Against that background, the article analyses the size and dynamics of the debt ratios of the various non-financial sectors in Belgium and in the euro area. This reveals wide differences between countries, particularly in regard to the size, dynamics and composition of the debt positions. Next, the sustainability of those debt positions is assessed on the basis of a number of key indicators to identify those countries and sectors where balance sheet repair is most needed. Finally, the authors examine to what extent the deleveraging process has already begun, and the role performed in that by demand and supply factors affecting lending.