Austerity is the word of the day in Europe at the moment. Massive government debt in countries like Greece, Spain and Ireland have led governments to implement severe austerity measures right across Europe. Services have been cut back, public servants have been laid off, pensions and salaries have been slashed. The effects of European austerity measures have been enormous and were the focus of a recent discussion on the BBC Business Daily program [Listen to the podcast here].

The forum highlighted and examined the human cost of austerity. Unemployment in Spain is at a staggering 25 per cent, unemployment in Ireland is 15 per cent and is only kept from rising by net emigration of 1,800 people per week. Millions of people have been affected by their governments’ drastic measures to deal with a debt crisis of enormous scale.

The discussion on the BBC World Service was thought-provoking. Different opinions and perspectives were intelligently discussed. Yet I was struck by the contribution of Irish economist and journalist, David McWilliams. Throughout the program he was advocating that a “deal” be done on debt­­– he was essentially suggesting that the debtor default and a deal be brokered between the creditor and debtor to determine how much could reasonably be repaid. He pointed to several examples, e.g. the US Savings and Loans crisis in 1992 and the Asian and Russian debt crises, which were solved by debt deals.

McWilliams identified the key problem as an age-old one­– creditors lend too much money to groups who just can’t pay it back. He suggests that the modern narrative is framed with the creditors in view. In financial crises there is always an apocalyptic vision (because the situation is framed by how much money lenders will lose). McWilliams goes on to claim that countries with debt don’t spend, which then leads to lower tax revenues for governments, and perpetuates a cycle of either further increases in taxes or further reduced spending which reinforces the cycle of reduced spending leading to lower tax revenues. McWilliams’ solution was a debt deal (or debt default), effectively a circuit breaker, which he claimed was as old as the Bible!

The Bible? What has the Bible to do with solving the Euro debt crisis?

McWilliams was referring to the laws given to the Jews in Leviticus and Deuteronomy which surround debt. These laws called for the forgiveness of debt after a certain period of time and the return of property. Deuteronomy 15:1 ‘At the end of every seven years you must cancel debts’. The purpose of these laws was to ensure that no-one in God’s land was poor or enslaved by financial hardship.

McWilliams has correctly identified that, in all ages, there are some people who borrow and get into financial trouble. Bad lending and borrowing decisions are made and financial debts arise. This leads to a form of slavery and poverty. The biblical solution was forgiveness­–the creditor at a certain time cancels the debt owed to him and does not exact repayment.

The principle of forgiveness is at the heart of the Christian message and was the focus of Jesus’ parable of the unforgiving servant (Matthew 18:23-35). The massive unpayable debt that we all owe to God is wiped away through Jesus so we can start again.

This philosophy is made more complex by the demands and intricacies of our modern financial markets. Yet the principle described by McWilliams, and the Bible is liberating! The burden of unpayable debt is released and the debtor is free to start again.

So, perhaps there is something to the notion of a debt deal to break the circuit. Maybe this Biblical principle might have something to say to the modern debt crisis?

Food for thought.

Robert Martin is Director of City Bible Forum in Melbourne.