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 in dealing with unserviceable debt.

 

Last year the “Greek problems” took centre stage. In the interim the problems in Southern European States such as Italy and Spain have still to be resolved.

Austerity has failed to bring public finances and debt under control. Increases in taxation and cuts in government spending have led to sharp contractions in economic activity, reducing government revenues and increasing welfare and support payments as unemployment rates increase. Budget deficits, while smaller, persist and debt levels continue to rise.

 

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 continues to be an uncertain time but one undisputable outcome of the above will be the hard ball attitude of the Banks towards companies seeking funding.

 

Now more than ever it will be necessary to demonstrate effective control over all areas of cost and exposure as the banks will undoubtedly remain reluctant lenders.