The continued low interest rates are a source of massive relief for private debtors in the Eurozone. In relation to GDP, Spain and Portugal reaped the greatest benefit from the drop in interest rates.
In the future, bank interest rates will increase again. The extent of this increase will depend not least on the speed at which monetary policy returns to normal. Rising interest rates will result in higher debt service payments for the private sector. This will not, however, simply mean that the previous relief is "reversed".
In the more likely event of “soft normalization”, on the other hand, interest payments are only expected to increase by around EUR 157bn, leaving them more than two fifths lower than in 2008 in absolute terms. The upshot: for the Eurozone as a whole, the relative interest burden is not only below the peak in 2008, but also generally lower than in the years before the crisis.
