First, over the short and medium run, the balance between savings and investment, and therefore the real interest rate, is also affected by many factors of more cyclical nature. Since the global financial crisis in 2008, these factors have predominantly exerted downward pressure on the real interest rate.
In the case of the euro area, it has still not emerged from its “balance sheet recession”, where a severe debt overhang and tightening of credit standards have required a substantial amount of deleveraging of both private and public sector balance sheets, thus reducing investment and prolonging the downturn.