The Janet & John Eurozone sovereign debt crisis explanation
What on earth is going on in Europe? We know there’s a Greek crisis, but what’s the cause and why does it affect us? It’s time to call in Janet and John…
I was on the BBC Radio 5 live consumer panel (every Thursday 1pm) with Shelagh Fogarty yesterday, when business presenter Dominic Laurie did a grand job of explaining what was happening in the Eurozone and why we are all affected.
Yet there were still texts from people saying they didn’t get it, so I volunteered to distil it into a Janet and John version. People seemed to like it, so I thought I’d put a slightly more detailed version here…
Imagine the world is a street. At one end are a group of neighbours who call themselves ‘The Euro Club’ who all have a pact that if they get into financial trouble they’ll help each other out.
"The Greek fella at the end has been spending a lot more in recent years than he can generate, and now he’s majorly in debt and close to going under – and a few of his neighbours like Ms Portugal aren’t that much better.
"The problem for the others in the pact, is they’ve promised to help Mr Greece and if they don’t their credit rating is linked to Mr Greece and if they don’t help it’ll hurt them too.
"Yet even for those up the street who aren’t in the pact. The truth is everyone’s lent money to Mr Greece and his chums, either personally, or their banks have and if he can’t repay then that could really hurt them.
"Not only that but with so few people in the street, they all rely on each other to spend on their businesses. So when someone is skint, or worse you worry that their cash is worthless, it has a massive knock on effect for everyone and could see lots of them really struggling to make ends meet."
Then yesterday we had the bail out, so I suppose to continue it is:
Now Mr Greece has been given a consolidation loan by his buddies. They’ve changed his debt into one low monthly convenient payment at a lower rate spread over a longer period in the hope he may be able to get his act together and repay that – as if he went bankrupt they’d never get owt back."
So that’s my attempt to explain it, (and do note, in real personal finance consolidation loans are often NOT the solution) now I’d love you to help.
PLEASE ADD YOUR OBSERVATIONS AND POINTS BELOW – IN JANET & JOHN STYLE.
