Debt: G7 must cancel illegitimate claims

Eight nongovernmental organizations in the G7 countries released recently a damning new report, “Skeletons in the Cupboard,” which argues that if the G7 is serious about corruption, good governance and transparency, it should apply these principles to the past.

The report highlights cases of illegitimate debts being claimed by the G7: Canada, France, Germany, Japan, Italy, the United Kingdom and the U.S. These loans were the result of irresponsible lending. Money was lent to regimes G7 governments knew to be corrupt or repressive to buy political allegiance, or to help rich country companies implement projects that were not viable.

The report argues that some debts should not be paid. Creditors should bear a large part of the responsibility for extending loans irresponsibly and negligently.

In October 2006, Norway unilaterally and without conditions agreed to cancel US$80 million in illegitimate debts owed by five countries: Egypt, Ecuador, Peru, Jamaica and Sierra Leone. The claims originated from the Norwegian Ship Export Campaign (1976- 80), under which Norway exported 156 vessels and ship’s equipment totaling NOK3.7 billion to 21 countries. In announcing the cancellation, Norway’s government admitted that the campaign represented a development policy failure and that, as a creditor country, Norway has a shared responsibility for the debts that followed. (See NewsNotes November- December 2006)

As “Skeletons in the Cupboard” was released, Gail Hurley, Policy Officer at EURODAD said, “[C]reditors need to be held accountable for the bad decisions they have made and share responsibility for mistakes. Northern politicians are obsessed about corruption and ensuring that taxpayers’ money is well-spent and not wasted by corrupt elites. These are valid concerns. But our governments have no credibility unless they apply these principles to the past. It is not acceptable for the G7 to preach good governance to developing nations while at the same time collecting debts that were corruptly made.”

“Skeletons in the Cupboard” includes examples of illegitimate held by each of the G7 countries:
• Germany exported warships to Indonesia during the Suharto regime despite concerns over how the vessels would be misused in internal conflicts.
• Japan supported the development of an aluminum project in Indonesia designed to serve the interests of Japan’s aluminum exporters and not benefit Indonesians.
• Italy sold three hydroelectric turbines to Ecuador when only two were needed and despite evidence that the hydropower plant was not viable and had devastated the local environment and communities.
• France was complicit in the stripping of Congo- Brazzaville’s oil wealth by French banks. ElfCongo benefited from loans from France’s development agency despite widespread concern that oil was disappearing.
• The United States supported the development of a nuclear power station on an earthquake fault line in the Philippines.
• The UK government guaranteed a commercial bank loan for a UK company which was providing consultancy services to Kenya at over five times the price the services should have cost. • Canada supported the construction of the Yacyretá dam in Argentina and Paraguay despite widespread allegations that the military dictatorships were siphoning off billions of dollars from the project.

Each case-study argues that these debts are illegitimate and should be investigated immediately via public and impartial audit processes. The report urges the G7 to follow Norway’s bold lead and accept shared responsibility for the debts.
For a copy of the full report and additional information, go to EURODAD’s website at http:// www.eurodad.org/ or to the website of Jubilee USA, www.jubileeusa.org.