European households’ and businesses’ struggles to pay their debts constitute a business opportunity for debt collectors and global asset managers looking to make good returns on investment. Yet the ongoing creation of a European market for distressed debts, and its active promotion by European institutions, raise important questions, both ethical and political, about whether we should rely on financial markets to tackle social issues such as indebtedness.
The austerity programmes imposed by the International Monetary Fund, the European Central Bank and the European Commission and implemented by governments after the 2008 financial crisis have affected living standards throughout Europe, particularly in so-called peripheral European countries. Governments have slashed funding in healthcare, pension, education, transport and culture; welfare benefits have been cut and VAT taxes hiked; and growing numbers of public services have been privatised, all with devastating effects on public health. At the same time, unemployment and precarious contracts have become increasingly common, and wages have decreased in real terms.
Insufficient revenues and inadequate state support, combined with credit that’s all too easy to access, have pushed many households to rely on debt to meet basic needs or pay for unexpected expenses such as illnesses. Yet as economic conditions have largely failed to improve – worsening still in some countries – people have also increasingly struggled to make regular debt payments. Most European countries have seen a rise in levels of arrears and over-indebtedness, and a surge in debt defaults since the global financial crisis.
