2 - 1999

The Debts of poor Countries

Dialoque

 


 

What is the Aim of the Campaign "Jubilee 2000"

Excerpt from an information paper

The German Campaign for a Jubilee Year 2000 (Kampagne Erlaßjahr 2000) is pressing governments to accept two basic demands: First, to drastically reduce the debt of poor countries so that they can pay their debt service without jeopardising social and economic development; and second, to introduce an insolvency law into international financial relations. In the following excerpt from a public statement, the Campaign explains its demands.

All attempts up to now to solve the debt crisis have failed. The many negotiations and new treaties have in the short term in most of the debtor countries merely served to allow the countries affected to pay interest and reduce debts for a while. The debts were and are too high for many nations even after many negotiations aimed at rescheduling and canceling loans. They can be lowered to a workable level only by a drastic reduction. The responsibility for the impossibly high debt level of many nations of the South today does not lie only with the debtors, but with the debtors and the creditors. Therefore both sides must contribute what they can to create a way out of the debt crisis.

A durable solution must be built upon internationally binding agreements. In a way similar to cases of corporate bankruptcies in Germany as well as of over-indebtedness by private households (since 1.1.1999), a process must be found internationally, within the framework of an insolvency law applying to countries, for negotiating rules for a solution which is acceptable for all sides.

Aims of the Campaign

The far-reaching remission of debts should:
  • free the poor countries from the intolerable burden of debts which their governments have contracted from the governments of the North, international financial institutions and private banks;
  • allow a sustainable development through a unique debt remission in favor of the poor nations in the year 2000;
  • work against the disproportionately high transfer of scarce resources from poor to rich countries;
  • open to the poor countries of the world a path toward greater economic and social justice as well as toward the realization of fundamental human rights;
  • work against the economic and social decay of the poor and highly indebted countries and thereby remove essential causes of international and internal conflicts.

The international insolvency law should:

  • establish fair and balanced relationships between international creditors and debtors. Instead of the present debt management, in which the creditors act simultaneously as plaintiff and as judge, a transparent and fair procedure should regulate the balance of interests between the two sides;
  • support the right of all peoples to development an economic self-determination, especially the right to the goods necessary for survival;
  • set the international financial relationships between creditors and debtors upon a new basis, which prevents the over-indebtedness of countries in the future.

Whose debts should be remitted?

The aim of the campaign is a far-reaching debt reduction for the poor countries of the South. We suggest that the level of the debt remission should match the relief granted to Germany in 1953. At that time the young Federal Republic had within the framework of the London Agreement of German External debt such a large part of the debts remitted that the annual debt service fell below 5% of its export income. The history of the German "economic miracle" demonstrates that such dimensions do not block economic development. Therefore today, too, the part of the debts which lead to payment obligations above 5% of the annual export income should be remitted.

All of the outstanding foreign debts as well as the interest due on these debts at the time of the opening of the procedure should be included in the debt reduction. The countries on whose banks debtor governments have deposited corruption profits from foreign loans shall see to it that these accounts are disclosed. This money should be used for the repayment of a part of the debts. This requires a new integrity in finance management on the part of the debtor nations.

Model for an international insolvency procedure

A model for a long term solution of the debt crisis could be the present insolvency law for regional bodies (federal states, communal units, municipalities, etc.) in the USA and in Hungary. A country which might be considered for remission would apply for the procedure for debt remission. Creditors and the debtor government would name the same number of judges for a small arbitration tribunal. These judges together name a further person so that the tribunal can make decisions by simple majority. The arbitration tribunal can entrust the United Nations, or another institution or organization which is deemed by all the parties to be nonpartisan, with the supervision of the implementation of its arbitration decision.

In an international, legally protected and transparent insolvency procedure the creditors and the debtors could put their cases. The creditors could have their claims legally validated and receive the payments which are economically feasible for the debtor nation. The debtor governments would work out a repayment plan together with the creditors and with the participation of the population, international experts and organizations. They could still sufficiently fulfill their basic tasks like the provision of education and health facilities, educational and health systems, environmental protection and infrastructure, because the means for these may not be used for paying back debts.

... In the states in which there is a risk of the government being glad of a remission of debts yet continuing to misuse tax incomes for private expenditure or to support a large army, conditions could be tied to the remission. The remission of debts can be regulated so that a part of each remitted Mark must be invested in projects from which the poor directly profit.

For this the debt remission must be coupled to the payment of a part of the equivalent amount of the remitted debt in the national currency of the debtor country into a fund. Money out of this fund could finance projects to cover basic social needs or, for example, a system of credit for small merchants, peasants, etc.

With the help of such a program the Swiss government remitted debts of more than 1 billion German Marks in the past years and at the same time ensured that a part of the remitted sum helped the people, even under dictatorial regimes. The condition for a proper use of the money is an appropriate participation of the civil society (churches, unions, non-government organizations) in the administration of these funds.

Excerpt from an information paper of the Campaign "Erlaßjahr 2000".