This is one of the chief outcomes of a recent DNB symposium on balance sheet restructuring.  The consequences of the severest financial crisis since 1929 are still not entirely calculable. Experiences from former crises, however, suggest a rather bleak picture for the future. A study of earlier crises shows that in the decade following a crisis GDP growth is considerably lower and – in two-thirds of the cases – unemployment substantially higher than before the crisis.  Furthermore, real house prices are on average 15 to 20% below the pre-crisis level. Finally, during the run-up to the crisis credit growth usually surges (by on average 38 percentage points of GDP over a period of ten years), and then plunges after the crisis, to more or less the same extent and over a similar duration. Based on previous crisis periods, the process of deleveraging, i.e. balance sheet recovery, may be expected to be prolonged. This will especially hold for countries where the crisis was preceded by a period of debt build-up running parallel to above-average GDP growth and house price hikes, as in the United States, Spain and Ireland. In the Netherlands, too, households, enterprises, governments, pension funds and banks have taken severe hits from the crisis.
Notably for banks, pension funds and governments a period of deleveraging will therefore be unavoidable for a number of years to come. Banks have had to write down substantially on US mortgages and financial instruments derived therefrom. In addition, the Basel Committee has responded to the financial crisis by drawing up stricter rules for banks’ solvency and liquidity. Studies have shown that the negative effect on economic growth is but minor: several tenths of a percent spread over a number of years.  Pension funds, too, have incurred asset losses during the credit crisis and stock market slump, besides having to cope with the consequences of low interest rates and rising life expectancy.
Governments will need to bolster their financial positions in the coming years. In many countries, central governments have absorbed the heaviest shocks of the financial crisis. Owing to its relatively favourable starting position, the Dutch government was able to perform its stabilizing role without appreciable problems. The Dutch debt ratio ran up sharply, though, from 45% ofGDPin 2007 to (an estimated) 66% ofGDPin 2011. To secure the sustainability of public finance, also in the face of an ageing working population, a period of consolidation has set in now. Public finance will thus be able to cushion any new economic setback.
For households and (non-financial) corporations the immediate need for deleveraging is less evident. Compared to other countries, unemployment and house prices developed relatively favourably in theNetherlands, making the urgency of balance sheet recovery for Dutch households less obvious than elsewhere. At the same time, depreciations of financial assets and homes along with increased income insecurity might prompt households to step up saving. Besides, high mortgage debt renders Dutch households vulnerable to ongoing price correction on the housing market. The degree of deleveraging in other sectors is another determinant of households’ saving behaviour. For example, households may proceed to set aside more money for the future and borrow less if the central government fails to put its finances in order, if pension benefits are reduced or if banks adopt stricter credit criteria. In addition, insecurity about the government's policy regarding the housing market or the pension system may – via confidence effects – stimulate the propensity to save.
For Dutch enterprises, too, the starting position is relatively favourable, although some are vulnerable to price corrections on the commercial property market. Since the start of this millennium, enterprises have had a savings surplus fluctuating around 6% ofGDP. In addition, at 45% ofGDP, their bank debts are some 15 percentage points lower compared to the euro area. Furthermore, having ample cash positions, as is reflected by their high bank balances, large corporations are relatively less troubled by banks’ strict lending criteria than small and medium-sized businesses.
It is therefore plausible that in the next few years the various sectors – notably banks, pension funds and governments – in theNetherlandswill strengthen their financial positions. Besides, countries that are relevant for our exports, like theUnited States, theUnited KingdomandSpain, will be even more bent on putting their balance sheets in order. While this deleveraging process may depress economic growth in the coming years, it may reduce the insecurity about financial stability. This will have a beneficial effect on the investment climate and, hence, economic prospects in the long term.
 Symposium entitled 'Naar een nieuwe balans'
 See C.M. Reinhart & V.R. Reinhart (2010), After the Fall.
 R.P. Berben, B.K. Bierut, W.A. van den End, and J.I. Kakes, 2010, Macro-effecten van hogere kapitaal- en liquiditeitstandaarden voor banken,DNBOccasional Study No.3.