Debt Hangover: Nonperforming Loans in Europe’s Emerging Economies

In emerging Europe, the share of loans classified as nonperforming—many of them household mortgages—have exploded from 3 percent before the crisis to 13 percent at the peak. NPLs in some parts of the Baltics and Balkans are already at par with previous financial crises elsewhere. Our analysis finds evidence that nonperforming loans are indeed a serious drag on credit supply and economic growth. They drive up banks’ funding costs and interest margins, and at the same time drain their profits and capital. On the credit demand side, over-extended households and businesses are reluctant to consume and invest.

Disappearing Deficits

In our work at the IMF, we sometimes discover that governments choose to employ accounting devices—or stratagems that make the deficit smaller without actually causing any pain, and without actually improving public finances. In ideal accounting, this would not be possible. In real accounting, it sometimes is.

“Macro…, what?!” The New Buzz on Financial Stability

When carefully implemented, macroprudential policy can become a cornerstone of financial stability policy. The dictionary of financial lingo has been given an important new entry.

Latin America: Making the Good Times Last

Clearly, global uncertainties have weighed on Latin America, but most economies are nevertheless growing close to potential and operating near full capacity, as shown by record low unemployment in many economies. Demand and credit growth have moderated, but continue to expand briskly, in some countries supported by public financial institutions. Overall, Latin America stands out as a relatively bright spot in a gloomy world scene.

The Logic and Fairness of Greece’s Program

The program deals squarely with the two most fundamental issues facing Greece―not only high debt but also low competitiveness. And it is fair, both in asking for shared sacrifices, not only within Greece, but also between Greece and its creditors.

Avoiding a Lost Generation

Young people were innocent bystanders in the global financial crisis, but they may well end up paying the heaviest price for the policy mistakes that have led us to where we are today. Young people will have to pay the taxes to service the debts accumulated in recent years.

Youth Speaking Out

Young people, hardest hit by the global economic downturn, are speaking out and demanding change. Coming of age in the Great Recession, the world’s youth face an uncertain future, with lengthening job lines, diminished opportunities, and bleaker prospects that are taking a heavy emotional toll. The March 2012 issue of Finance & Development magazine looks at the challenges facing young people today.

Load More Posts