This is a big week for Europe as the European Union as we know it appears to be on the verge of producing its first casualty in the shape of Greece. International news outlets and media centres have been covering Greece's economic woes extensively over the last few months, but it appears that matters have progressed to an irrecoverable stage in the last week, as Europe's powerbrokers continue to increase the pressure on Greece and its people.
The European model is complex, but in general it assumes that one size fits all, and for me compares apples with oranges. As we know, one size does not fit all, as all of the countries in the Union are very different and each in different stages of economic health. The common denominator in Europe is that many of the countries have too much debt and not enough growth and the austerity model that is being enforced is only adding to the stress, in particular for many of the smaller highly indebted nations. It's now gotten to the point for Greece that it does not work unless they get significant debt forgiveness that would allow the economy some respite and give it an opportunity to grow. As we sit today, this appears more unlikely, and if I was a betting man I would say that Greece will leave the Eurozone, reintroduce the drachma and start putting its energy into reinventing itself over what will be a very rocky road in the next few years.
Debt Forgiveness is not a new phenomenon, in fact it happens every day in the commercial world via informal arrangements between debtors and creditors and also through formal arrangements. It's the way of the world. Banks are very familiar with debt forgiveness as it goes with the territory if you are in the business of lending money. History tells us also that debt forgiveness is a necessary evil for certain situations to improve, and in Greece’s case, it's very clear that they certainly could use this gesture from their European partners. However, it would appear that when your back's against the wall, certainly in the European Union's case, you certainly know who your friends are.
At GDP, we are in the business of helping people move forward with their lives. We introduced a debt forgiveness mindset and model to the local Northern Ireland market in 2011. At that time, I remember clearly many professional colleagues and firms saying we were mad and that banks wouldn’t do deals. How wrong where they? In the last few years, we have built up the business and have had millions of pounds written off on our clients' behalf, mainly from institutions. This has allowed banks to recover what they could and has also allowed our client base to get on with their lives. It's very clear that for the European model to have longevity, in my view, they need to have a more flexible approach to those countries within the union that are struggling. This idea that “you just have to pay” is Neanderthal and simply doesn’t work. The Germans, who are highly influential in Europe, have a short memory, as in 1947-1950 they had the majority of their debt wiped, allowing them to build and grow again. It would appear given this example that what is good for the goose isn’t necessarily good for the gander.