Millions of Europeans can be in huge financial crisis due to Covid-19

Plans to end effective labor services in Europe during the Covid-19 pandemic threaten to fall into debt traps for millions of households.

A massive increase in families burdened by bills that they cannot afford has been reported by a number of European organizations which help people to overcome their financial difficulties. Their list includes citizens from wealthier countries such as Germany and Austria.

Maria Kemmetmueller, deputy director of the debt counseling agencies in Austria said, “We already see significantly more enquiries from people seeking advice in some provinces as compared to last year.”

About 10% of EU households are already facing a financial crisis: figures of the European Consumer Debt Network, which tries to fight over-indebtedness. Counselor Kosta Skliris says this would double at least.

A research conducted by Bruegal in Brussels found that nearly one third of European households would be unable to cover unforeseen expenses even before the crisis.

The Resolution Foundation said this month that if they lost their primary source of income for a three-month period, 44 per cent of UK households would be unable to pay their expenses until the crisis.

An employee is supposed to return to work or to be restored from reduced schedule in order to reduce their financial crisis. Yet government is only concerned about their debt loads and rising unemployment.

“The need for advice is going to rise significantly. At some point they’ll realise they can’t manage on their own, which is when they turn up in counselling,” said Roman Schlag, spokesman for the German association of debt counsellors and a debt expert at Caritas.

Low wage labourers are mostly employed in coronavirus-hit sectors such as retail, tourism, and hospitality. As self-employers are tend to rely on a limited number of clients, they might not have access to all government support programs.

The European Central Bank cited household debt sustainability as one of the risks in its latest Financial Stability Review in May.

In many countries, debtors will be left in the hands of private lawyers, unregulated counsellors or other organizations without expert knowledge.

Counselor Skliris commented that “people often try to fill a hole by digging another hole.” Despite the extremely high interest rates, households may turn to alternatives such as payday lenders. Or they’ll struggle to make their payment to the detriment of missing others, he added.