Varieties of Private Household Debt in Europe: Incompatibility of Culturally Diverse Lending Regimes between Germany and Italy?

This article examines the varying development of private household debt across
European countries, using a mixed methods design. Quantitative analysis
demonstrates that trade deficits, public debt and unemployment spending influence
the volume of private debt. While this suggests a high problem load for
Italian households, a comparative case study on Germany and Italy reveals
that more German than Italian households end up in critical debt. This is
explained by the two countries’ different cultures of lending. Italian households
borrow more heavily from family and friends than German ones. Moreover, the
competitive dynamic of the German growth model creates incentives for lowincome
groups to borrow; to the extent this dynamic affects both countries,
this translates into demand for more risky loans in Germany and economic
pressure on families in Italy, ultimately limiting the compatibility of the different
lending regimes.