Unserviceable debt – the spectre at the feast

 

“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.

Greece has asked for two more years to meet the spending cuts demanded by its lenders, which include the Eurozone countries through its bailout funds and also the IMF.

The IMF’s Ms Lagarde backed the calls, but Germany have maintained their previous line that on the terms of the 130bn-euro (£105bn; $168bn) bailout - Greece's second since 2010 - Athens must be held to what it agreed.

At stake is whether Greece should receive the next tranche of the bailout, worth 31.5bn euros. Without it it risks running out of money by the end of next month.

In spite of the hard line talk it will be no surprise to see real politik coming into play  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.