Most of the countries have an urgent need of broad-based structural reforms: in the labour market, the pension system, public enterprises and elsewhere. They are facing massive pressure from the markets and the EU to introduce such structural reforms. But any steps are met with fierce public opposition – and the political will also seems to be lacking in some of the countries.
Even if debtors can refinance existing loans at zero (or very low) nominal interest rates, a sustained fall in prices will transform what might otherwise be a manageable level of nominal debt accumulated by businesses and households into a rising and potentially debilitating level of real debt and real debt service costs.