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European Parliament demands EU action as debt crises “ravage” developing countries

Added 17 Apr 2018
  • EU must reform its own lending practices, says European Parliament report.
  • Member States must also act on 2015 UN resolution to establish a multilateral legal framework for sovereign debt restructuring.

Brussels, Tuesday April 17 2018. 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.

Mark Perera, Senior Networking and Advocacy Officer at the European Network on Debt and Development, said: “According to the IMF, only 1 in 5 developing countries are considered to be at low risk of crisis. The latest independent figures state that 119 countries in the Global South are now critically in debt, with the total debt of all low- and middle-income countries worldwide standing at nearly seven trillion US dollars.

“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.

Perera added: “The Parliament’s report emphasises the responsibility that the EU has in working to resolve debt crises. Without action now, the achievement of the Sustainable Development Goals – to which the EU is committed – will also be impossible, as developing countries will have to service unsustainable debt instead of investing in vital services for their citizens.”

ENDS

Media contact: Julia Ravenscroft, Communications Manager at Eurodad: jravenscroft@eurodad.org/ 0486356814/ 02 893 0854

Notes to editors:

o   In in 87 of these countries, the situation has worsened in the last four years. 13 countries have ceased payments to creditors.

o   The total debt of all low- and middle-income countries worldwide is $6.877 trillion.

  • To read Eurodad’s reaction to the latest IMF figures on debt crises in the Global South see here.