Untold stories of personal debt in Europe

This article introduces a blog series jointly coordinated by Finance Watch and the Sheffield Political Economy Research Institute (SPERI), in which researchers illuminate the many aspects of personal debt, and how they play out in Europe. The series was conceived before the current COVID-19 outbreak, and as such it doesn’t directly address the impacts that the current health crisis is having on debt and indebted individuals. Yet the issues raised in this series are as relevant as ever – in fact, many of them are likely to be exacerbated by the ongoing turmoil. 

This is the first part of a new joint SPERI- Finance Watch series on Untold stories of personal debt in Europe

Debt and finance are intricately related to ‘everyday life’. From Sweden to Greece, indebted families, single parents, students and migrants face welfare cuts, struggle to pay their bills and reimburse their debts. Some are excluded, or voluntarily exclude themselves, from mainstream financial services, while others have no choice but to rely on abusive loans to make ends meet. 

If much has been said about sovereign debt and its prolonged crises in Europe, the more mundane question of personal debt is too often ignored, or taken as a given. In addition, European states’ reluctance to address (neo)imperialism, racism and sexism goes some way in explaining our still limited understanding of debt and finance’s entanglements with imperialism, race and gender — a topic discussed more at length in the United States, for example in relation to student debt, mortgages or banking

The stories of how debt affects everyday life — generating new vulnerabilities and exacerbating existing ones — remain largely untold. Policymakers are unable to grasp the magnitude of the issues at stake, and we collectively fail to acknowledge the deeply political nature of debt. In this series, we want to talk about the other debt stories in Europe, acknowledging their class, race and gender implications, and the ways in which they relate to wider financialisation and political economy dynamics. In exploring the multifaceted politics of personal debt and finance in Europe, we hope to show that these intersections are not mere abstractions: they have tremendous long-term repercussions on people’s lives, wellbeing, health and social inclusion. 

Looking at U.K. personal debt through an intersectional feminist analysis, Sara Reis criticises the twisted narrative according to which personal debt is caused by personal irresponsibility. She shows that debt has the most damaging effects on people already suffering from structural discriminations — poor people, women and,  in particular, women of colour — which in turn reproduces and worsens existing inequalities.

Indebtedness itself does not come out of the blue. As Marcella Corsi argues, there are many factors behind debt, which are symptomatic of much wider neoliberal trends, such as the privatisation and marketisation of public services across Europe. Illustrating the fundamental class nature of debt and banking, she highlights the less favourable credit terms and conditions imposed on the most precarious debtors, which often result in debt spirals. Over-indebtedness, in turn, leads to social stigma and disempowerment, feelings of distress, anxiety and depression, and in the worst of cases, suicide. Fredrik Tjulander and Richard Alstrom examine the troubling links between over-indebtedness and ill-health, and present the case of a Swedish care center that combines debt advice and psychiatric therapy.

It is evident, then, that despite promises to uphold human dignity — as enshrined in the EU Charter of Fundamental Rights — the EU falls short of protecting citizens from the devastating effects of debt and precarity. Searching for structural and political solutions to these issues, our contributors propose legislative and regulatory changes. Olivier Jérusalmy digs into the EU legislative agenda on credit consumers and provides concrete regulatory recommendations that would ensure a more effective and comprehensive protection of over-indebted individuals.

Johnna Montgomerie, for her part, makes the case for a modern household debt jubilee, through which household and consumer loans that have already been discharged by banks could be cancelled and forgiven. Such a straightforward yet radical measure would be much welcomed in the European context. Indeed, growing volumes of distressed debts point to certain limits to financialisation, and a crisis of social reproduction — at the same time though, these so-called non-performing loans form the basis for yet another round of EU-led financialisation, as Caroline Metz argues in her two-part blog. In the second part, she shows how EU efforts to develop distressed debt markets echo the debt collection and private equity sectors’ willingness to marketise and capitalise on distressed debtors in austerity-stricken countries, to the detriment of debtors’ rights.  

Last but not least, Martina Tazzoli sheds light on the oft-neglected topic of migrants’ relation to debt and finance. The temporary financial inclusion of refugees in Greece via the Cash Assistance Programme, she tells us, is far from meeting the official objectives of empowering asylum seekers. Rather, migrants are subjected to contradictory obligations: to act as if they were autonomous, but to comply, first and foremost, with restrictions imposed by Western humanitarianism.

As this series of articles showcases, personal debt is neither a mutually beneficial exchange of money, nor is it just an individual matter. As a thoroughly social and political matter, debt is best understood as a form of power. We hope that looking at different aspects of personal debt and related financial processes in Europe will help uncover its intersectional dimension, and will contribute to a wider political discussion aimed at improving the lives and dignity of all. 

Read all of the blogs in our joint SPERI- Finance Watch mini-series on Untold stories of personal debt in Europe