Great Graphic: Mortgage Default Rates in Italy, Spain and Portugal

This Great Graphic is was tweeted by Niall O'Connor, who got it from Natixis.  It shows the default rates on mortgage loans in three euro zone countries:  Italy, Spain and Portugal.  

Spain, is the only one of the three that had a housing market bubble. Yet, since early 2010, Italian home owners had a higher default rate, though more recently, Spain has closed the gap.  

By late 2012 or early 2103, Spain's had surpassed it as well.  The mortgage default rate in Portugal also surpassed Spain's in 2010.  

It seems perverse to regard an increase in the mortgage default rate as a constructive development, but in a certain context it might be.    The increase in default rates might not reflect a change on the ground as much as a change in bank classification of loans that more accurately reflects its status.  This seems to be at least partly the case in Spain.  

This is not to play down the hardships caused by the weak economy, high unemployment and weak wage growth.  Yet, just like a fever, which is both symptom of an illness and an attempt, the rise in mortgage default rates is may be both  sign of economic stress and the effort to address it.   One needs to understand the context in which the increase in mortgage default rates has taken place.   To understand the speed at which an euro area country addresses the challenge of household debt, and mortgage debt in particular, one need not look toward Brussels or Frankfurt, but the institutional arrangements, and the political  economic culture of the individual country.