Eurodad plays a key role in efforts to secure international recognition and cancellation of illegitimate debt. Illegitimate debts are those debts which did not benefit the populations of developing countries. This may be because the loan was contracted by a despotic power which then stole the cash, used it to build-up their military capabilities or to oppress the people, or because the loan was contracted for ill-conceived and corrupt development projects which failed.
Eurodad believes that impoverished people in developing countries should not be burdened by paying for these debts. Creditors must assume co-responsibility. In many cases, creditors extended loans in the full knowledge that the funds would not be used for effective development purposes. Moreover, Northern banks have been safe havens for loans stolen by corrupt dictators. This is unacceptable: stolen wealth should be returned to the developing country in question.
The campaign for international recognition and cancellation of illegitimate debt focuses on exposing key cases and working to secure new international lending standards and approaches. These are outlined in Eurodad’s Charter on Responsible Finance which outlines the steps both lenders and borrowers must take to ensure a responsible, legitimate and development-oriented loan transaction process. Debt audit processes are also gaining ground in both the South and North which unpack the loan portfolio to reveal which debts are of dubious origin and therefore should not be repaid. New rules in the international debt architecture include enshrining the principal of creditor co-responsibility and working to introduce fair and transparent arbitration procedures. A website has been created to coordinate the international campaign on illegitimate debt.
In October 2006, Norway agreed to cancel the debts of five countries acknowledging “shared responsibility” for the debts which ensued from failed domestic-interest driven lending in the 1970s and 1980s. So far Norway is the only lender to take this important step, but Eurodad is working with colleagues across Europe to push other Governments to follow this lead. Eurodad’s role involves exposing key cases of odious and illegitimate debt, direct advocacy and support to debt audit processes. In 2007 and 2008, Eurodad worked on an official debt audit with the Ecuadorian Government to analyse its bilateral debt contracts and Paris Club loan consolidation agreements and is working to highlight the results of this audit process to lenders. Eurodad is also involved in bringing members and colleagues together to strategise on the issue, including on new international lending standards, arbitration and repudiation.
Every year in October, organisations from around the globe organise activities for the Global Week of Action Against Debt. During this event, the harmful impact of debt service and the illegitimacy of debt are highlighted. Find out more about the Global Week from the specialist website.