Unserviceable debt – who carries the can?

“If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem” the famous quotation from JP Getty neatly sums up the dilemma faced by the international community in dealing with the Greek debt problem.

During the first meeting between Germany’s Chancellor Merkel and France’s President Hollande both expressed the desire that Greece should stick to the terms of the existing bail out agreement. The harsh reality being that the consequences of Greece exiting the Euro would have extremely damaging repercussions.

In spite of the hard line talk from organisations like the IMF it will come as no surprise to see real politik coming into play following the Greek election of June 17th and a fresh compromise being offered to the Greeks, in effect kicking the problem further down the road.

The fact is the international community will have to learn to accommodate the spectre of countries failing to grapple effectively with their debt burdens. In turn this will inhibit growth and limit the speed and strength of global economic recovery.

It will be an uncertain time but one undisputable outcome of the above will be the hard ball attitude of the Banks towards companies seeking funding. It will become ever more necessary to demonstrate effective control over all areas of cost and exposure as the banks will undoubtedly remain reluctant lenders.