One of many uncertainties still hanging over Europe’s economic recovery is how the household sector will cope with the debt reduction being sought. A decade-long trend of generous credit expansion is now going into reverse, but household deleveraging will take time and it will require continued policy support to prevent an abrupt retrenchment from debt, which could obstruct countries’ recovery.

In this CEPS Policy Brief, published in March, Stefano Micossi called upon the European Council to consider launching a new growth initiative, centered on mobilising vast resources at EU level for investment in worthy projects of common Europe-wide interest.