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Lack Of Adjustment Of The Cyprus Household Sector: Results From The Eurosystem’S Household Finance And Consumption Surveys

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  • Leslie G. Manison

    (Economist)

Abstract

The results from the second wave of the Eurosysystem’s Household Finance and Consumption Survey (HFCS) indicate that Cyprus households experienced very large falls in their incomes and value of real assets between 2009/2010 and 2013/2014. However, despite their worsening financial situation households largely maintained their relatively high level of consumption during the crisis years from 2012 onward by taking on more debt and running down their financial assets. This relative failure of Cyprus households to adjust their expenditures and repair their balance sheets during recent years has resulted in huge debt problems for many households and their creditors. Indeed, HFCS estimates indicate that the ratio of required debt payments to income for Cyprus indebted households reached 35.7% in 2014 and was an overwhelming 64.1% for the least-wealthy bottom 20%. Policy recommendations for dealing with the serious financial difficulties of households are advanced including a program to write-off the debt of households which do not have the ability to repay.

Suggested Citation

  • Leslie G. Manison, 2017. "Lack Of Adjustment Of The Cyprus Household Sector: Results From The Eurosystem’S Household Finance And Consumption Surveys," Development Discussion Papers 2017-10, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:307
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    References listed on IDEAS

    as
    1. International Monetary Fund, 2013. "Cyprus: Second Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria," IMF Staff Country Reports 2013/374, International Monetary Fund.
    2. Michael Hudson, 2012. "The Road to Debt Deflation, Debt Peonage, and Neofeudalism," Economics Working Paper Archive wp_708, Levy Economics Institute.
    3. Leslie G. Manison & Savvakis C. Savvides, 2017. "Neglect Private Debt at the Economy’s Peril: Applying Balance Sheet Recession Analysis to the Post Bail-in Cyprus Economy," Development Discussion Papers 2017-06, JDI Executive Programs.
    4. International Monetary Fund, 2013. "Cyprus: Request for an Arrangement Under the Extended Fund Facility," IMF Staff Country Reports 2013/125, International Monetary Fund.
    5. Leslie G. Manison & Savvakis C. Savvides, 2016. "Towards Sustainable Growth: Rebuilding the Foundations of the Cyprus Economy," Development Discussion Papers 2016-07, JDI Executive Programs.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    household net wealth; household dissaving; household debt; middle-class squeeze; tax evasion; debt write-offs.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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