October 2020 [10] This included a substantial deleveraging by non-financial, non-real-estate SMEs over the last decade with outstanding bank debt declining from € billion in late 2010 to € billion in the second quarter of 2020 – see link [11] Central Bank of Ireland. SME Market Report 2020- The Impact of COVID-19 on SMEs 2020 [12] Central Bank of Ireland.
As well Government spending cannot cushion the effects of financial crises when public debt levels are already too high. These effects are further magnified if households, firms, and governments have borrowed from a banking sector which is insufficiently capitalised. Adverse shocks then set into motion a downward spirals of asset valuations and prices that ultimately threaten the solvency of financial institutions.