For example, in a debt overhang environment it is not clear that accommodative monetary policy is inimical to balance sheet repair. In many countries low interest rates have in fact helped stabilise debt dynamics via reduced interest rate burdens, and thereby facilitated balance sheet adjustment. The interest spending-to-GDP ratio of euro area governments has declined on average by 0.4 p.p.
of GDP between 2012 and 2014. Similarly, the debt burden of households and firms has fallen and reduced bank funding costs have contributed positively to retained earnings, which accelerates the deleveraging of bank balance sheets. All this makes it easier for monetary policy to normalise over the medium-term.