Private and Public Debt

The ongoing financial and economic crisis has caused that the unsustainability can be shifted from public to private sectors. If this happens it may cause a spate of bankruptcies in private sectors. In our sample of 18 EU Member States we have observed a rapid rise in the ratio of private debt to GDP in the majority of states with the acceleration in 2009-2011. The culmination of the ratio of private to public debt was mainly in the crisis years 2007 and 2008. Since 2008 this ratio has the tendency to decline. Postsocialist countries exhibit, on the average, low indebtedness but are catching up. Private sector indebtedness has been decomposed into debts of households on the one side and the debts of non-financial corporations on the other side. Worth of mentioning is the fact that highly indebted countries at the level of general government are not the main culprits as concerns private indebtedness.