Experts express concern over rising levels of consumer debt

There are rising concerns being voiced in the media that Czech households are getting deeper and deeper into debt, and more and more of them are having trouble paying back their loans. Household debt was estimated at around 450 billion crowns last year, but take away mortgages and that's a lot of unsecured debt which more and more families are having problems paying back.

Rising debt is something of a perennial theme for the Czech media. As households aspire to own the same consumer products as their neighbours elsewhere in Europe, they're borrowing more and more money to do so.

The final figures for 2005 aren't yet in, but the monthly figures show a steady rise. In October Czechs had borrowed a total of 87 billion crowns, or 3.5 billion US dollars in consumer loans. By November, that figure had risen to 94 billion, and the figure was expected to well exceed 100 billion when December's pre-Christmas figures are added.

Not only are people borrowing more money, but more and more are having problems paying it back. Forced administrator Lubos Smrcka wrote in Mlada fronta Dnes today that based on his analysis, around seven percent of households were having trouble with repayments last summer, but now the figure has risen to between 10 and 15 percent. Translated into real terms, he says around 100,000 families - approximately 250,000 people - are in a situation where their essential expenditure and debt repayments exceed their income. That, he says, is a ticking time bomb.

Most economists say the figures are nothing to worry about. Around 10 percent of Europe's families have problems paying off their debts, and the Czech Republic started out at a very low level of indebtedness. They also point out that the figures are distorted over Christmas, which is when the media traditionally seizes on the problem. But it's the general trend that Mr Smrcka is concerned about.

There are two bills currently being examined by the lower house which would offer a potential way out for debt-ridden families - personal bankruptcy. Under such legislation a family in debt would ask for court protection, and if it is able to agree with its creditors, the family finances will be regulated - almost like a company being placed into forced administration - for up to five years. During that time the family will attempt to pay off as many debts as possible, and if that attempt is successful, it will be relieved of its outstanding debts. It sounds like an extreme solution, but with debt rising at these levels insiders such as Mr Smrcka clearly believe that's the only way to tackle it.