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Eurozone troubles could affect UK households

 

The recent row between England and France at the EU-27 summit may be more than just a temporary blip in Anglo-French relations and herald a deterioration of the debt situation at home, the Debt Advisory Line’s Craig Gedey has said. Although the UK haven’t actually introduced the Euro yet, the country’s economy is very much dependent on the currency’s performance and fluctuations. If the Eurozone members turn out to be incapable of resolving the current crisis, the effects will, with all likelihood cross the channel and affect UK markets as well – with potentially disastrous effects on national debt levels, according to Gedey.

One of the less obvious, but very real dangers of the current Eurozone troubles is their potential impact on bankruptcies and IVAs in the UK. For the past two years, these have remained relatively stable at a high level, mostly because many households have taken on dangerous, unsecured credits to cover their expenses, saving more and delaying major purchases. The combination of declining consumption at home and decreasing exports due to similar troubles abroad could result in rising unemployment figures in the not too distant future. This, in turn, could push some of those who can just about pay their bills today, over the cliff and into insolvency.

Even more threateningly, as a direct result of an economic downturn, anyone currently in an IVA could slide into a fully-fledged bankruptcy as well. As part of an Individual Voluntary Arrangement, after all, debtors and lenders agree on a new payment plan, writing off some of the debt, but leaving a substantial part intact. The procedure depends incisively on regular monthly payments by borrowers and is thus always threatened by negative changes in the overall economic climate. Reducing their spending is frequently not an option for those in an IVA, as they have already squeezed their income as much as possible – beyond that looms only bankruptcy.

We’re watching these issues with worry“, Gedey said, “At the same time, there are solutions at hand. Debt management is not just intended to fight an impending bankruptcy; it is also a precautionary measure. Those currently facing financial difficulties and in danger of seeing their situation deteriorate over the next months are strongly recommended to seek professional debt advice as soon as possible. Although the Eurozone leaders may still be able to sort out their differences and arrive at sensible solutions to the issues at hand, consumers should be prepared for the worst.“