European Parliament demands action as debt crises hit global South

• EU must commit to more responsible lending says European Parliament report.
• Member States must also act on 2015 UN resolution to establish a multilateral legal framework for sovereign debt restructuring

Campaigners are backing calls for the EU to act following the adoption of a damning report by the European Parliament that lays bare the growing debt crisis in developing countries.
The Report on Enhancing Developing Countries’ Debt Sustainability calls on the EU and its Member States to both reform their own lending practices and take the lead in developing an international framework to prevent and resolve debt crises.

Sarah-Jayne Clifton, Director of the Jubilee Debt Campaign, said:

“Developing country debt payments have risen by 60% in the last three years. The European Parliament is right to call for more responsible lending, greater transparency over loans and debts, and a better way to restructure debts when crises arise. Europe’s own debt crisis in recent years has shown the problems that arise when reckless lenders are bailed-out, rather than requiring the private sector to carry some of the costs of crises they help to create.”

Linda McAvan MEP, Chair of the Committee on Development in the European Parliament, said:

“Almost 20 years since the historic agreement to cancel developing countries’ debts, and unsustainable debt is on the rise again in some of the world’s poorest countries. Opaque and sometimes unscrupulous lending is back – and all too often, the details of those loans are hidden from the public and even their elected representatives. That’s got to change. Loans to governments must be subject to rules requiring transparency and public accountability. And when rules are not followed, lenders should forfeit their rights to initiate legal proceedings to recover that debt. We can’t afford to repeat past mistakes.”

MEPs vote in the European Parliament (Flickr / European Union 2011 PE-EP/Pietro Naj-Oleari)

Mark Perera, Senior Networking and Advocacy Officer at the European Network on Debt and Development (Eurodad), said:

“The Parliament is calling for the EU to take the lead in establishing a multilateral legal framework for restructuring sovereign debt, following decades of piecemeal responses to debt crises both in developing countries and in Europe itself. While rules exist for bankrupt countries and individuals, they do not exist for countries and this situation needs to change. Without a solid framework, countries risk serial crises, with their citizens ultimately paying the price in stalled development and eroded human rights.”

The report recommends that:

  • EU Member States act on a 2015 UN resolution and push forward efforts to establish a multilateral legal framework for sovereign debt restructuring;
  • EU-wide legislation is adopted on vulture funds, taking a lead from legislation in Belgium;
  • A European Commission white paper is produced setting out a strategy to prevent impoverished countries from reaching excessive debt levels, via a multilateral approach;
  • The EU should support the implementation of the UNCTAD principles on responsible lending and borrowing;
  • EU Member States support the creation of a public registry on sovereign debt data (including contingent liabilities), and for more transparency over their own lending;
  • EU and Member States to promote a human rights based approach to debt sustainability assessments carried out by the IMF-World Bank;
  • The EU and Member States adhere to the UN Guiding Principles on foreign debt and human rights in their bilateral lending.
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