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DEBT

Debt agency calls for greater compassion

Several civil servants have called for Sweden to take a more compassionate approach to people in debt.

Published: 5 January 2009 11:36 CET

Sweden’s justice ministry is currently working on the issue.

Unforeseen events in life such as illness, unemployment, divorce or bereavement carry with them an economic cost and can affect anyone, and senior civil servants such as Eva Liedström Adler at the Swedish enforcement service (Rikskronofogden), argue that the pervading attitude can not be “you only have yourself to blame.”

“For example, two years ago no one working at Volvo could predict that the bottom would fall out of the market,” said Liedström Adler.

Together with the Financial Supervisory Board, the Institute of Public Health, the National Board for Consumer Policies and the National Board for Youth Affairs she is demanding that the government develops a clear strategy to manage excessive debts and their consequences.

“We do not expect that all debts be written off but we want to have a clear goal,” said Liedström Adler, using the government’s homeless goal to illustrate her point.

“The goal that no child should be homeless gives us a clear picture of where we want to head.”

Over 400,000 people in Sweden have problems paying their bills. The figure is even higher if family members are also included. The situation often afflicts households with small margins.

“There are so many in debt with feelings of shame. A person in debt has told a maximum of three people,” Liedström Adler concluded.

The burden of excessive debt costs the society 30-50 billion kronor ($4-6.5 billion) in the form of increased medical care costs and production decline.

The responsibility to ensure that the burden of debt is not too great is shared between debtors and creditors. Kronofogden has in recent years been critical of fast loans that can be secured by text message and have led to many joining its defaulter register.

Justice Minister Beatrice Ask has recently received a report, entitled the Insolvency inquiry, which proposes easing regulations to enable the provision of help to a greater number of those defaulting on their debts.

The report has been submitted for a process of review and consultation.

With regard to text message loans the justice ministry will soon publish a memorandum with proposals regarding the marketing of loans as well as credit assessment decisions.

COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Published: 6 December 2022 17:23 CET
Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

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