Cypriot households and businesses have accumulated more private debt than any other country in the eurozone, despite efforts for deleveraging made in the last year.
According to the latest figures from the European Central Bank, Cyprus’ debt is three times larger than the country’s Gross Domestic Product (GDP) reaching 288% and exceeding Luxembourg, the country with the second highest private debt at 185%.
In 2013, the debt of Cypriot households came to €22.4 billion compared to €24.1b in 2012, or 135.84% and 136.22% of the GDP respectively.
Household debt is also high in Luxembourg (80.71%), followed by Portugal (77.89%) and Holland (71.45%) while private debt has reached 62.92% of GDP in Greece and 66.02% in Ireland.
In the eurozone, the average percentage of household debt comes to 54.47% of the GDP.
In addition to households, Cypriot businesses also hold the highest debt levels in the eurozone.
In 2013, the debt of Cypriot businesses, most of which are construction companies which secured loans for property development, came to €25.2b or 152.37% of GDP compared to €26.9b or 151.80% in 2012.
Luxembourg is the country with the second highest business debt at 104.54%, followed by Spain (61.15%), Portugal (60.64%) and Italy (52.66%).
In Greece the percentage of business debt comes to 53.75% of GDP, while in the eurozone the average is 42.25%.
According to the ECB, the level of debt which has accumulated on the balance sheets of local households and businesses is partly due to the reckless granting of loans by banks in previous years without the verification of ability for repayment.
It is also the result of a shrinking economy and lower salaries in recent years which have contributed to the increase of debt.
The level of private debt makes the management of non-performing loans (NPLs) much more difficult for banks to manage, as based on the latest figures NPLs came to more than €26bn in January in an economy worth €17b.