Icelandic households among the most indebted in Europe

Icelandic households are among the most indebted in Europe, when debts are compared to earnings. The potentially worrying figures may have reasonable explanations, an economics professor says.

Eurostat this week released information on the debt position of European households as a percentage of their income. The average European household owes 99 percent of its annual income in overall debts — a slight increase on the same time last year, RÚV reports. Among the most indebted households across European nations, the average Irish family owes 202 percent of annual earnings, the Dutch 249 percent and the Norwegians 178 percent.

The Central Bank of Iceland has also released similar figures which show that the average Icelandic household debt was 230 percent of annual income at the end of last year and therefore approximately double the Eurozone average.

“These are clearly extremely high figures and a lot of debt. Most other countries have much lower figures,” says Reykjavík University economist Katrín Ólafsdóttir.

Asked if she thinks the debt level is dangerous, she answered: “That is a hard question to answer. As long is it is possible to pay the loans then it is not a problem.”

Katrín says that in the case of Iceland it is important to look to the assets accrued against the debts, and also to the country’s high levels of pension savings. “There is a very high proportion of people here in Iceland who own their own property (houses ed.) which is not so high [a proportion] elsewhere; so a rather large part of this debt it down to property,” Katrín added.