credit

We’ve been looking at the future of banking here on Debating Europe, in partnership with ING. So far, we’ve looked at what Europeans want from banks and whether the EU should better regulate cross-border banking. However, we haven’t yet looked at consumers themselves and how they interact with banks and financial services in general.

On that note, we had a comment sent in from Eoin from Ireland, who seemed quite critical of young Europeans and their attitude to credit and debt:

My parents experienced the recession of the 1970s and 1980s, yet people did not have the expectation that people in Ireland have today; EXPECTATION is a direct result of the boom times in Ireland – the so-called ‘Celtic Tiger’. Obviously, people are paying for this today in terms of negative equity, unemployment, immigration and huge issues with personal debt.

Are young people today too quick to take on personal debt? Are they less financially responsible than their parents’ generation? To get a reaction, we took this comment to Rok Primozic, Chair of the European Students’ Union.

Rok thought that more financial education for young people might help, but he thought it was unfair to focus specifically on young people when the whole of society, including governments and older generations, have been over-reliant on debt and credit (particularly in the run-up to the financial crisis). His sentiment is echoed by a comment from Daniel, who believes that part of the problem is an excessive focus on consumerism in modern society:

Consumers are too pressured to get everything NOW. Too much credit is being used for consumption rather than investment or education; culturally we are extremely short-sighted.

We took this comment to Ian Bright, Senior economist at ING, to see how he would respond:

Ian Bright agreed that an over-reliance on credit was harmful, but went on to argue that this doesn’t mean that all debt is necessarily a bad thing, particularly when it is being used to invest in future benefits (such as a quality education).

However, like Rok Primozic, he also believed it was important for people to have a better understanding of the banking system and how to effectively budget and manage finances. In fact, a 2012 report commissioned by ING showed that, across Europe, 89% of people thought that financial education should be taught in schools.

To get some further thoughts on this matter, we spoke to Androulla Vassiliou, the EU Commissioner for Education, to see whether she thought better financial education in schools in Europe would be a good idea. She pointed out that OECD studies indicate that many Europeans lack even basic mathematics and numeracy skills, so the priority should be on improving these. Only when these minimum skill requirements are met should the focus turn to better financial education.

We also spoke to Jim Murray, President of the European Foundation for Financial Inclusion (EUFFI). He agreed that more financial education was a good idea in principal, but cautioned that there was a limit to the number of things that can meaningfully be taught in schools without overloading students:

Finally, we spoke to Said El Khadraoui, a Belgian MEP who sits with the S&D in the European Parliament. He argued that nobody really has a clear idea how financial systems work today, including regulators. However, he did support greater financial education in schools so that citizens can make more informed decisions when it comes to financial services.

Are young people today too quick to take on personal debt? Are they less financially responsible than their parents’ generation? And should better financial education be taught in schools? Or should the focus first be on improving basic mathematics and numeracy skills? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts for their reactions.

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23 comments Post a commentComment

What do YOU think?

  1. Stavros Pagonidis

    Personal debt shouldn’t exist. Debt only makes sense if I am planning to borrow 100, make it 150 and pay back 120.

    Debt for travel or shopping is just an agreement between the current bank manager and the consumer to mess up their bank’s/household’s long-term finances in favour of short-term partying.

  2. Jaime Martins

    Think on people not in the gread of the bankers, ensure a fair wage to all people in Europe, allowing a balanced growth throughout the European economy.
    The credit has been one of the negatives pointed to the people who are in monetary aid, and now, you’re asking if we should live to the base of the credit?
    Fat Bankers are you’re owners!!!

  3. KALLISTRATOS DIONELIS

    The Holy Economic Books balance over the same old story: Years of “abundance” always appear throughout, but years of “famine” will always follow them.

    Managing thoroughly during these periods is simple. it just requires accepting and managing properly “credit” and “debt”.

  4. catherine benning

    Yes, or course they are. But, what else can they do in such a ridiculous economic system as this is? They often have no other choice if they want to survive at all.

    Our economy is run entirely on debt and pretending it isn’t is ridiculous. In fact the present UK government has once again pushed to increase the property market hype by inflated property prices. We are again on the way to another Fanny Mae and Freddie Mac.

    What do you expect? Sensible, stable, thought out reaction by those with little experience?

    The question here is, what does the EU intend to do to curb this economic insanity, imposed on our population by so called American allies and colluded in by themselves?

  5. Bart Vd B

    all high-schools should educate teens on the consequences on taking out a loan/credit cards, there is no such thing as free/easy money….

  6. eusebio manuel vestias pecurto

    As escolas deviam criar um sistema de educação finaceira para não cairem nos erros do sistemas finaceiros Por isso eu também defendo uma educação finaceira dentro das escolas Europeias

  7. Christos Mouzeviris

    Eerrrmm.. Because our governments and the banks that they support encourage this attitude, if not promote it aggressively? Before the crisis I was receiving every two or three months “deals” and “offers” from my banks for loans that I did not need.. Buy new car.. Go on holidays.. Extend my conservoratory (that I do not have).. When I needed a loan to study, they declined because I had a very good credit history.. See where the problem lies with Europe’s banks?

  8. Chris Morrison

    I really worry for the youth of Europe. The progressive erosion of every mortal standard that made Europe the world’s most civilised place to live has been little less than vandalised, and two of those key standards are that people have to live within their means and that there is no automatic right to anything: things have to be earned before they are acquired. This varies from country to country of course, but Britain has had the most appalling depression ( yes folks- It wasn’t a recession: it was a DEPRESSION, and for some nations it is STILL ongoing) due in some part to unsustainable levels of debt both public and private. The system has been over driven to the point of insolvency, and sadly the youth will be carrying the public debts of recent governments well into their middle age in the from of larger than needed to be taxation. Credit only ever works when it is used as a tool for wealth growth. Made an end in itself it is little more than beggary and as a lifestyle it usually ends up in misery. My advice is avoid it where never you can. And you can in a surprising amount of ways.

  9. Marcel

    As others have mentioned, the entire western world is too reliant on credit and debt. Now for private households, some limited borrowing isn’t necessarily all that bad, although I do recommend avoiding debt if possible.

    For governments however, I strongly believe that it should not be allowed under any circumstances. No government should be allowed to borrow money and run up debt. As we have seen, it is all to easy for politicians to overspend in order to buy votes and then pass the bill on to the next generations.

    And considering that perpetual economic growth is impossible, and that perpetually increasing debt would be needed to sustain the current financial economic system, anybody can see that it is unsustainable and will end, probably sooner (30 years).

    Over the last 6 years, every western country’s debt has increased, without exception. Outstanding liabilities, contingent liabilities and derivative exposure has vastly increased and policitians and central banks are trying to frantically re-blow up stock market and real estate bubbles. Massive amounts of ‘quantative easing’ (ie bailouts for the rich, despite what the central bank propaganda tries to claim) and not a dent is made.

    Europe above all has reason to worry. Hardly any natural resources, more ‘free trade’ treaties (TIPP ea) will see hundreds of thousands more jobs disappear to low wage countries (note that corporate and political propaganda claims the opposite). Europe, as someone so aptly put it, is a ‘museum’. And immigrants that come, mostly come for handouts, not to work like in the USA.

    Maybe it will last my lifetime, but it should be abundantly clear that it cannot last forever. However, no one seems to want to do anything about it. We’re in a 150 mph train heading for a railway bridge that was blown up in 2008.

  10. Lígia Mesquita

    We don’t need to teach people how to deal with banks, what we need is to teach banks how to deal with people. In fact, the EU needs some lessons on this matter given that if we are a “community” why is there a bank getting profit from european citizens?And this gets even worse when we realize that whenever a country needs help, instead of working on steady, solid development for that country what the EU does is to “sell” them money involving organizations where the USA is more represented than Europe.
    Who do you think you’re dealing with, fellas? Be very careful, we won’t tolerate what our parents and grandparents did.

  11. Lígia Mesquita

    Young people are mad and very well educated which does not go along very well with corrupt systems. Say what you will, economy is not a science because there’s no certain, absolute causality in it. Humans came up with it and made the rules and most of the time decide how things go, acording to the rules or not. Said that, if it doesn’t work don’t blame “the system” or “the markets” as if they’re some kind of allmighty gods. These “gods” are in fact people and have names.

    • Marcel

      Young people are mad? Then why aren’t they on the barricades to overthrow these pro-banker anti-poor governments we have now? No, the young people these days want these same governments to grab even more powers, tax the middle class even more so the young people can all have a cozy government job for life.

      Not one time have I heard a youth group in Greece call for the overthrow of banker stooge Samaras.

  12. Pieter

    I do think learning about budgeting and saving is a different skill to just basic maths and numeracy. Maths was taught to me in quite an abstract fashion, and I can imagine some fun exercises for a class involving managing a budget of pretend money in order to “buy” some treat or school trip or something at the end of term.

  13. Paul X

    @ Debating Europe

    When are we going to get some topics on here that do not revolve around if the EU should regulate on this, that or the other?

    How about asking an EU politician to justify the taxpayers expense of the parliament swapping between Strasbourg and Brussels?
    Have them explain to me what value this adds to the business of the parliament and how it benefits me as a EU taxpayer?

    • D.Dinev

      @ Paul X
      It doesn’t add any value. This is why such questions were/are/and would be avoided. Furthermore dinging into parliament expenses would bring up other questions about taxpayers money spend here and there without any reasonable explanation…

    • Marcel

      Paul X, I could not agree more.

      Debate questions should be: “Do we really need political integration”, “Would economic cooperation suffice”, “Do the Germans have the right to keep their own wealth or should they be forced to hand over 20% of their GDP to implement fiscal transfers and thus ‘save’ the Euro”?

  14. Paul X

    @D.Dinev

    I totally agree

    The EU is run for the benefit of the politicians and commissioners, most who have failed at national level and have jumped on the EU bandwagon as easy option to their power grabbing ambitions and a fat salary
    They arrogantly ignore the will of the people who are supposed to be grateful to hand over their taxes to keep such a wonderous organisation in existence

  15. Arthur

    Financial Education is key, but just the first step. Influencing behavior of adolescents is not easy. You need to develop skills to reach that goal. It is a joint effort of the financial industry, government (education) and other stakeholders.

  16. Avatar of claudio63
    claudio63

    I agree with Stavros Pagonidis .. debt should not exist for private .. Everyone should know that if has not resources must not do an high level trend life ..
    Law of income and outcome balancing

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