The European Union has announced a new initiative to recover the estimated £48bn of debt that is written off every year because of the difficulty of bringing lawsuits overseas.

Some 60% of cross-border debts cannot be recovered because, as the law stands, enforcement measures such as freezing bank accounts or requiring banks to pay creditors from a debtor’s account are left entirely to national law.

An order can be obtained in one country, but if the debtor then moves money to another country, then the expensive and time-consuming legal process must begin again.

However, a new regulation proposed by commissioner for justice, fundamental rights and citizenship Viviane Reding (pictured) will for the first time allow the EU to enforce the debt recovery decisions of national courts across all member states.

It will allow a creditor, using a single procedure, to freeze funds in a debtor’s bank account in one or several EU member states, preventing money from being moved to another country while also providing an incentive to settle claims quickly.

Reding said: ‘I want to make the recovery of cross-border debts as easy as recovering debts domestically. Trust is the currency of our single market.

'Businesses and consumers have to know that they can get their money back.’

Fewer than 30% of companies in the EU now do business across national borders, according to one survey, and just 8% of Europe’s smaller companies do business outside their home country.

The new regulation should make it easier for businesses of all sizes to operate in the single market, strengthening the economy and boosting recovery.

Reding’s department is currently carrying out an impact assessment on the proposed new regulation, which she plans to announce formally in July.