Private Debt Is the Problem

Given the huge private debt in Cyprus, the risk of a recession is very high because of the compelling need for households and corporations to repair their balance sheets. The Central Bank now admits that it may take 10 years to tackle the huge non-performing loans problem. What they do not realise however, is that there is a deep and long recession that goes with this wait if we choose to do nothing and stay the course of austerity. The paper concludes that rather than staring blissfully down the abyss, the government should be ready and have in place the institutions and provide for fiscal measures which will mitigate and cushion the effects of the coming, but very foreseeable, recession