Personal debt: more interest rate rises will be cataclysmic

From Asbury Park Press: ‘Spanish debt collectors use shame’ | “In Spain, a visit from a monk may have nothing to do with the spiritual.

El Monasterio del Cobro, a Madrid-based debt collection company, employs 15 men in Franciscan friar outfits to harass deadbeats into paying their bills.

"First of all, we try to talk to the debtor to persuade him to pay what he owes," says General Manager Miguel Gonzalez. "If that strategy fails, the monks pay a visit."

Spanish debt collectors in fancy dress, whose roots go back to the Middle Ages, are bracing for a surge in business as rising interest rates begin to slow economic growth, squeezing companies and consumers. After holding rates steady for more than two years, the European Central Bank on March 2 raised its benchmark rate for the second time since December, bringing it to 2.5 percent.

"Interest rates are rising as inflation eats away at the real income of Spanish borrowers," says Pere Brachfield, director of the default studies department at Escuela de Administracion de Empresas, a business school in Barcelona. "For some, it'll cause a cataclysm."

Spain's economic growth, which has outpaced the euro-region average for a decade, will slow to 2.8 percent in 2007 from 3.4 percent in 2005, according to Banco Bilbao Vizcaya Argentaria SA, the country's No. 2 lender. Consumer prices rose at an annual rate of 4.2 percent in January, the fastest pace in nine years and the highest rate in the euro region.”

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