WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

In a special chapter ("Debt dynamics, flow of funds and deleveraging") of the wiiw Forecast "Recovery: Limp and Battered", the debt developments of the private (households, corporate) and public sectors before and after the start of the financial crisis are examined and compared with those in the GIPS countries (Greece, Ireland, Portugal, Spain). The burden of the build-up of private sector debt before the crisis has important consequences for spending and savings behaviour of households and enterprises and hence for the development of domestic demand (consumption and investment). In this respect we show strikingly different patterns for different groups of CESEE economies (e.g. Czech Republic and Poland on the one hand and the Baltic countries, Bulgaria and Romania on the other). The chapter also examines developments on the revenue and expenditure sides of fiscal balances in the course of the crisis. We come up with a more optimistic assessment regarding public debt sustainability in the CESEE region compared to the GIPS countries.