LONDON (MarketWatch) — Which euro-zone country is most deeply in debt? The
profligate Greeks, with their generous state-funded pensions? The
Cypriots and their banks stuffed with dodgy Russian money? The
recession-hit Spaniards or the boom-and-bust Irish?
None of the above. Actually, it is the sober, responsible Dutch.
Consumer debt in the Netherlands has hit 250% of available income, one of the
highest levels in the world. In Spain, by comparison, it has never gone
above 125%.
The Netherlands has turned into one of the most
heavily indebted countries in the world. It has slumped into recession
and shows very little sign of coming out of it. The euro crisis has been dragging on for three years now but so far has only infected the
peripheral nations within the single currency. But the Netherlands is a
core member of both the euro and the European Union. If it can’t survive in the euro zone, then the game really will be up.
Holland has
always been one of the most prosperous and stable nations with Europe —
and one of the most pro-EU. It was a founding member of the union, and
it was among the most enthusiastic supporters of the launch of the
single currency. With a rich, export-oriented economy, and plenty of
successful multinational companies, it had much to gain, one would
suppose, from the creation of the single economy that was meant to come
into being once the euro was successfully launched.
But instead it has started to play out a depressingly familiar script. It
is blowing up in exactly the same way that Ireland, Greece and Portugal
did — except on a slightly longer fuse.
Low interest rates, set
mainly to benefit the German economy, and lots of cheap capital led to a property boom and an explosion of debt. From the launch of the single
currency to the peak of the market, Dutch house prices doubled, making
it one of the most overheated markets in the world.
Now that has
crashed spectacularly. House prices are falling as fast as they did in
Florida when the American housing boom turned sour. Prices are now 16.6% lower than they were at the peak of the bubble in 2008. The National
Association of Estate Agents predicts another 7% drop this year. Unless
you bought your home back in the last century, it will now be worth less than you paid for it — and even worse, probably less than you borrowed
on it as well.
As a result, the Dutch are now sinking under a tide of debt. At more than 250%, household debt is even higher than in
Ireland and 2 ½ times the level in Greece. Already one bank was rescued
by the government, and with house prices still collapsing there may well be more to come. The Dutch banks have 650 billion euros outstanding on
real estate that is rapidly falling in value — and if there is one thing we know for sure about the financial markets it is that when the
property markets collapse, the financial system is not far behind.
http://articles.marketwatch.com/2013-05-08/commentary/39100378_1_single-currency-household-debt-estate-agents
profligate Greeks, with their generous state-funded pensions? The
Cypriots and their banks stuffed with dodgy Russian money? The
recession-hit Spaniards or the boom-and-bust Irish?
None of the above. Actually, it is the sober, responsible Dutch.
Consumer debt in the Netherlands has hit 250% of available income, one of the
highest levels in the world. In Spain, by comparison, it has never gone
above 125%.
The Netherlands has turned into one of the most
heavily indebted countries in the world. It has slumped into recession
and shows very little sign of coming out of it. The euro crisis has been dragging on for three years now but so far has only infected the
peripheral nations within the single currency. But the Netherlands is a
core member of both the euro and the European Union. If it can’t survive in the euro zone, then the game really will be up.
Holland has
always been one of the most prosperous and stable nations with Europe —
and one of the most pro-EU. It was a founding member of the union, and
it was among the most enthusiastic supporters of the launch of the
single currency. With a rich, export-oriented economy, and plenty of
successful multinational companies, it had much to gain, one would
suppose, from the creation of the single economy that was meant to come
into being once the euro was successfully launched.
But instead it has started to play out a depressingly familiar script. It
is blowing up in exactly the same way that Ireland, Greece and Portugal
did — except on a slightly longer fuse.
Low interest rates, set
mainly to benefit the German economy, and lots of cheap capital led to a property boom and an explosion of debt. From the launch of the single
currency to the peak of the market, Dutch house prices doubled, making
it one of the most overheated markets in the world.
Now that has
crashed spectacularly. House prices are falling as fast as they did in
Florida when the American housing boom turned sour. Prices are now 16.6% lower than they were at the peak of the bubble in 2008. The National
Association of Estate Agents predicts another 7% drop this year. Unless
you bought your home back in the last century, it will now be worth less than you paid for it — and even worse, probably less than you borrowed
on it as well.
As a result, the Dutch are now sinking under a tide of debt. At more than 250%, household debt is even higher than in
Ireland and 2 ½ times the level in Greece. Already one bank was rescued
by the government, and with house prices still collapsing there may well be more to come. The Dutch banks have 650 billion euros outstanding on
real estate that is rapidly falling in value — and if there is one thing we know for sure about the financial markets it is that when the
property markets collapse, the financial system is not far behind.
http://articles.marketwatch.com/2013-05-08/commentary/39100378_1_single-currency-household-debt-estate-agents
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