R & M Report 2012 - European Debt Crisis

This part of the report was prepared by Dr Alex Ross and explains the much publicised crisis in Europe already alluded to. The rapidly changing nature of events in Europe may bring up unexpected results, but it is important to look at these things in the light of biblical principles.

In recent years debt has become a worrying problem, not only in regard individuals, but also to businesses and governments. For individuals, in most situations it is prudent to avoid debt altogether. However there comes a time for many people where they need to get into debt, such as to buy a house. Some students indeed are constrained to take on debt to advance their education. The idea being that when they are working, they will be able to repay. Such an arrangement is still prudent because there is a well-expected opportunity for repayment.  Where debt is taken on where there is no obvious means of repayment, it effectively becomes akin to gambling in its imprudence. The present worldwide debt crisis is due, at least in measure, to taking on imprudent debt e.g. mortgages that were of greater value than the property, the excessive leveraging of financial products etc.

Such imprudence is also in evidence concerning the sovereign debt crisis in Europe, where governments have borrowed to fund their present policies in order to meet costs in excess of income. Their hope has been that their national economies would expand to allow the debt to be repaid at some time in future. The present market judgement in regard to the default risk of that debt indicates that much of it was indeed imprudent. Four of those countries most affected by the debt crisis – Greece, Ireland, Italy, and Spain are reported to be in the top ten of those nations with the highest gambling addiction as evidenced by per capita gambling losses in 2010 (The Economist, The biggest losers 16 May 2011). Lack of prudence amongst the citizens therefore seems to have gone hand in hand with the imprudence of the governments, and is evidence of deeper societal ills.

These southern European nations have also very long ago cast off the true gospel in favour of the traditions of men. Therefore we might expect to see the fruit of prudence more diminished there, than in those European nations where there was a greater influence of the Reformation. The degree of worldwide angst about the European debt crisis calls to mind that prophecy concerning the fall of Babylon, “And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more:” (Rev. 18:11). We are not in a position to judge the application of that prophecy to the present crisis, but ought to be mindful that both the evil fruits of Babylon and her judgement are likely to be conjoined.

The lack of acceptance of responsibility amongst both government and citizens in Greece regarding their unsustainable debt, presents a dishonourable character. The failure to honour debts, which ought to be a matter of shame and humiliation, and have a humbling and repenting affect, is instead accompanied by violent demonstration amongst the populace in response to politicians who are not prepared to accept the blame for their actions. The present debt crisis is fluid. It has the potential to become much worse if the lawless behaviour seen in Greece deteriorates further and spreads to the Latin nations.

Whilst the debt crisis has arisen through imprudence, it appears to be exacerbated by the structural economic imbalances between Eurozone countries caused by its one-size-fits-all economic policy, which severely limit sovereign action at the national level. The imprudence of successive UK governments in regard to our own mounting debt burden is not much less than that of the nations of southern Europe. That we are not so deeply embroiled in the present crisis is due to the providential circumstances of not having joined the Eurozone; and we ought to be rendering thanks to the Most High for that blessing. We ought also to pray that the crisis would yet be made instrumental in leading those affected to say “It is good for me that I have been afflicted; that I might learn thy statutes.”  Psa119:71.