, has risen sharply in recent decades. our part of the world became the champions of globalisation. we had the winning combination : highly educated labour, open economies with access to a large european market and, in norway ’ s case, abundant natural resources. our group of countries is characterised by solid government finances. public debt has fallen through the entire period under consideration. at the same time, the countries in northern europe have amassed substantial financial assets, either in public or in private hands. chart 4 substantial wealth – different composition we often think that norway really stands out, with its big sovereign wealth fund and substantial external assets. but along many dimensions we are actually fairly similar to our closest neighbours. sweden, denmark and the netherlands also have considerable savings. in these countries, however, saving takes place in private pension funds. throughout northern europe, pension savings entitle us all to a future income flow, whether this saving takes place in a public scheme or through compulsory pension agreements. the security this entails also enables households to bring forward a considerable portion of their consumption by borrowing, and to do so willingly. together with solid income growth and low interest rates, this has fuelled a systematically faster rise in private debt levels than in income. households with faith in the future borrow and invest. we borrow today, because we are confident that the income will come tomorrow. how can debt be reduced? while the financial crisis in 2008 brought debt growth to a sudden halt in some countries, debt growth continues to outpace income growth for norwegian households. this can hardly go on forever. if debt needs to be reduced, the question is how? sovereign borrowers can levy taxes and thereby have a reliable source of revenue. even so, being the creditor of a sovereign can be risky. in 1918, after the russian revolution, the bolsheviks repudiated all debt issued by the previous regime. french investors, among them many small savers, held nearly half of the russian national debt at the beginning of the first world war. they were among the first big losers of the russian revolution. 2 in the inter - war period, these losses had consequences for french foreign policy. france became a fierce opponent of the soviet regime. the losses on tsarist bonds may have also contributed to france ’ s unwillingness to restructure german debt after the war. germany ’ s debt burden contributed to the hyperinflation of the 1920s and the fall of the weimar republic. now, on the evening of 9 april,

and the economy gets back on its feet faster. household debt is harder to restructure. norwegian households can settle debt by liquidating their assets, but this usually only takes place after the borrower dies. 4 before that, the rule is that debt follows you to your grave. norway has a debt settlement act. very few would voluntarily petition to enter into a debt settlement arrangement. while some of the debt may be forgiven, such an arrangement involves garnishment of wages, down to the minimum for necessities. many of those who enter into such an arrangement in norway struggle with debts incurred while self - employed. recent years have seen a sharp rise in consumer debt. defaulting on this sort of debt is much more common than defaulting on a residential mortgage. default does not mean that lenders forfeit their money. if a borrower defaults on consumer debt, the creditor can have the debtor ’ s wages garnished. sale of assets may be necessary to avoid a debt settlement arrangement. this gives lenders strong protection – also those handsomely compensated for the risk by the high interest rates they charge on unsecured household loans. creditor protection is intended to induce prudence among borrowers, since they know that the debt will have to be repaid. paradoxically, this may make it just a little too attractive to promote this kind of credit. mortgage debt normally entails sound collateral for the lender. nevertheless, in downturns when property prices fall sharply, such debt may be difficult to manage. if many people try to deleverage at the same time by selling their homes, prices and collateral values will fall. if collateral values fall sharply, it becomes difficult to restructure debt. what is the significance of the housing market? nearly 90 percent of household debt is mortgaged using property as collateral. and debt growth 4 / 7 bis central bankers'speeches largely tracks house prices. so despite the substantial rise in consumer debt in recent years, the big picture continues to be dominated by mortgage debt. as we invest so heavily in housing – primarily using borrowed money – house prices are a key determinant of our net wealth. it is often said that people in norway own their homes. reality is slightly more nuanced. twentythree percent of norwegian households rent the home in which they live. however, it has long been a cross - party objective for people to be able to own their home if they wish. chart 5 :