Consequences of the subprime crisis in Europe: reduction of key interest rates and increase of government expenditure for the recovery of activities
The bankruptcy of Lehman Brothers in September 2008 meant that the developed countries were shaken by the Great Recession and were calling a halt to the indebtedness of many households and companies. To support the activity, central banks have significantly reduced their key interest rates, while governments have increased their spending. Moreover, in order to consolidate the financial sector, the private debts related to the property bubble have finally been taken over by the state, particularly in the peripheral countries of the euro zone.
Deleveraging has been slow. The ratio of household debt to GDP has been on a downward trend since the end of 2009, particularly in the euro area. Elsewhere he stayed close to his maximum. The indebtedness of non-financial corporations has changed little, despite the improved profitability, with low interest rates making debt financing very attractive. This environment has also softened the urgency of fiscal consolidation. The decline in the government debt ratio started only in mid-2016 due to the ongoing economic recovery.