2  If we analyse how lending has evolved compared with income, in the business sector the recovery of turnover and the subdued growth of debt in 2021 appear to have led to an improvement in firms’ financial situation, although on average it is still more vulnerable than before the pandemic. Thus, firms’ average debt and debt burden ratios began to fall in 2021 and the percentage of highly-indebted firms2 decreased across the board, down to almost pre-pandemic levels in the sectors moderately affected and largely unaffected, but still 7 percentage points (pp) higher than in 2019 in those that were severely affected. 2  Firms are understood to be highly indebted when their ratio of net financial debt to (gross operating profit + financial revenue) is higher than 10, or they have positive net financial debt and zero or negative earnings. 3  In the case of households, favourable labour market and income developments are also contributing to the recovery in their economic and financial situation. In 2021, households’ gross disposable income (GDI) grew by 2.2%, although it remained 2.8% down on 2019. From the onset of the health crisis to end-2021, households’ aggregate net wealth rose by 9.8%, assisted by the increase in value of their financial assets and, above all, their real estate assets and by their relatively stable debt levels.
As in the past, in this latest episode the structural deficiencies identified are partly linked to a deficit of cohesion among the national economies that can only be remedied through further relinquishing of sovereignty. Perhaps the relative novelty of the recent crisis in the monetary union is that it shows, with particular seriousness, that any delay or lack of resolve in adopting the necessary reforms would not only be harmful to European construction but would generate very pronounced risks to economic and financial stability in Europe and the rest of the world. Admittedly, major reforms to monetary union governance have been made to date. I refer, for instance, to the new requirements made of domestic policies to contain macroeconomic imbalances in several areas, to the surveillance mechanisms established for these requirements and to the setting in place of national crisis-management systems, with centralised financial support arrangements for those countries most affected. However, such progress is not sufficient to ensure the proper functioning of a common monetary area. One of the main manifestations of the shortcomings observed is the continuing market fragmentation within the euro area. This is, namely, the existence of a country-risk component that means that markets assign different valuations to similar financial assets on the basis of the issuer’s nationality. In particular, the perceived risk of financial institutions’ liabilities depends to some extent on their geographical location.