An interesting point from McKinsey's report From austerity to prosperity: Seven priorities for the long term:
Recent MGI [McKinsey Global Institute] research has demonstrated that deleveraging has followed nearly every major financial crisis since World War II and that this is usually a long and difficult process. Although there are instances of economies deleveraging through default, high inflation or by simply growing out of debt, the most common type of post-crisis deleveraging is belt-tightening. MGI analysis shows that such efforts have lasted an average of six to seven years and reduced total debt to GDP by about 25 percentage points. In nearly every episode MGI examined, GDP growth declined in the first one to two years of the deleveraging process but then rebounded, even while deleveraging continued.
An earlier McKinsey report revealed that Britain had become the second most-indebted nation in the developed world, second only to Japan. Combined public-private debt reached c.460% of GDP in the second quarter of 2009, up from c.210% in 1990. So this is clearly a very real economic issue.
I'd suggest that this deleveraging is very much a good thing in the long run. Recessions are all about economies adapting to changed circumstances, and laying foundations for future growth – that is, for real, sustainable recovery, not just re-inflation through fiscal and monetary expansion. David Simpson put the general case well in his excellent Adam Smith Institute report The Recession:
The alternative, classical, view is that boom and bust are an inseparable part of the growing market economy. From this perspective the recession is the remedial phase of the cycle in which relative prices, having been distorted by the boom, return to normal. In other words, the recession is a necessary period of adjustment to the distortions created by the boom.