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

The recent developments in the euro area have shown how important it is that the various economic sectors pay attention to their financial positions. In the literature, the approach to analyse these positions is often partial, focusing on the government sector or just on the gross debt, as in the case of Reinhart and Rogoff (2010) and Cecchetti et al. (2011). This paper conducts an aggregate analysis of the debt positions of the euro area countries, taking account not only of the public debt but also of private sector debt and the financial assets of the various sectors (net debt). On the basis of this analysis, it emerges that euro area countries differ extensively in terms of their total net debt. In a context of hampered financial integration, the euro area might benefit from a reduction of these differences. JEL Classification: E42, E61, F32, F34, F36, F