Tsunami: « Paris Club is not generous »

Wednesday 19 January 2005, by Vincent Slits

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Eric Toussaint thinks that the moratorium is far from sufficient and will have negative effects.

For the president of the Committee for the Cancellation of the Third World Debt Eric Toussaint, the decision taken by Paris Club creditor countries towards the economies affected by the tsunami is not sufficient. “The tsunami was a tragedy which led to a huge movement of sympathy and generosity among the public opinion in creditor countries. Paris Club (which includes 19 of the richest countries in the world) could not remain indifferent to this movement. Real generosity would have been a total cancellation of the debt but Paris Club did not go that far”, Eric Toussaint explains. And he adds :“Paris Club is afraid that the indebted countries declare themselves in a non-payment situation and unilaterally decide a moratorium. This was the case at the end of 2001 for Argentina which decided a moratorium on the 100 billion dollars public debt it had contracted to private creditors. Such a series of moratoria would be prejudicial to Paris Club which then would lose not only the control of the situation but also some of its credibility. This is why creditor countries chose to take the initiative by proposing a moratorium and defining themselves its conditions”.

According to Eric Toussaint, a moratorium on the debt - i.e. a temporary suspension of repayment - does not provide the economies affected by the tsunami - Indonesia, Sri Lanka and Seychelles - with structural solutions.

At the end of the day, these countries will have to repay the whole debt and will not dispose of sufficient means to help their peoples. And while repayment is suspended, interests will still be accruing. Moreover, creditor countries accept such a moratorium only if certain political and social measures included in the Washington Consensus - under the control of the IMF and World Bank - are implemented. The result is a neoliberal-inspired policy, based on an opening of economies to exports and investment from creditor countries, associated to austerity programs of public and social expenditure”, says Eric Toussaint, who goes into details about Indonesia: “The IMF programs in 1998 had very negative effects. Interest rates climbed to 20% and above, leading to the 18 main Indonesian banks going bankrupt and thousands of companies closing down. In a country which had put the IMF agreements to an end, accepting this moratorium is very significant of the seriousness of its situation”.

Eric Toussaint promotes debt cancellation in these countries. "For three reasons. Firstly: these countries should dispose of their tax revenues to cover their own needs instead of repaying the debt. Secondly: we have calculated that from 1982, the year when the Third World debt exploded, to 2003, the countries affected by the tsunami had repaid 11 times the amount due at that time, that is a total of 880 billion dollars. These countries have entered a permanent indebting cycle. Thirdly: in several countries, as Indonesia with Suharto regime from 1965 to 1998, most of the debt is under what we call the odious debt, that is a debt contracted by a despotic government without taking care of its people. It is in the name of this odious debt principle that Washington obtained from its Paris Club partners the cancellation of 80% of the debt contracted by Iraq under Saddam Hussein regime. Such a measure could also be implemented in Asian countries”.

Interviewed by VINCENT SLITS, of the Belgian newspaper La Libre Belgique (http://www.lalibre.be), 13 January 2005.
Translated by Sylvie Guillocheau (ATTAC France and Babels)