European consumers are having a harder time dealing with underwater mortgages than those in the United States, thanks to tougher national bankruptcy laws that prevent them from escaping creditors. Many of these consumers are therefore on the hook for unpaid mortgage balances even after losing their homes amid property bubbles primarily in Spain and Ireland.
In Spain, housing prices have dropped some 30% at a time when more than one in four workers remain without a job. The inability to pay these mortgages or transfer them to banks has resulted in a downward pressure on many home prices, which themselves remain the primary asset held by many households around the world, exacerbating the problems.
Until these pressures subside, the European recovery may have a long road ahead.