Introduction and Related Literature 4

  Related literature 5

Data Sources 8

  Household Survey Data 8

  Bank Supervisory Data 12

Identifying Vulnerable Households 13

Estimating Household Default Risk 16

  Methodology 16

  Findings 17

Stress Testing Households 19

  Description of the Scenarios 19

  Findings 21

    Households at Risk 21

    Debt at risk 24

Impact on Euro Area Banks’ Solvency 25

  Procedure 26

  Findings 27

Impact on Consumption 31

The Impact of Policies 30

  European Fiscal Response to the Middle East War 30

  Cost Effectiveness of Household Transfers 31

  Cost Effectiveness of Interest Payments Relief 33

Conclusions 39

References 44

Appendix I: Robustness and Predictive Valuation 48