The International Monetary Fund says targeted household debt reduction policies - including mortgage writedowns - can deliver significant economic benefits.
It says debt reduction can boost the economies of recession-hit countries where large parts of the population are burdened with high mortgage debt, and can counter falling house prices and reduced economic demand.
In its latest World Economic Outlook, the IMF is essentially proposing cutting mortgage costs to get the economy growing.
t says the US in the 1930 and Iceland today took bold steps to reduce mortgage costs for a significant part of their population, who went on to spend any money freed up as a result, delivering an economic stimulus.
The IMF says the policy works best in countries that have already recapitalised their banks, but which are carrying so much government debt they cannot afford a traditional economic stimulus programme.
But the IMF declined to say whether Ireland should introduce such a programme, noting only that the Government plans to introduce a series of reforms to personal insolvency law this year.
It says household debt restructuring programmes can significantly reduce the number of household defaults and foreclosures and substantially reduce debt repayment burdens.
In so doing, they help to stop the vicious circle of falling house prices and shrinking economic demand.
The IMF declined to say whether Ireland should introduce such a programme.
