Position paper of the Austrian/German campaign

 

The following paper has been agreed upon by “Erlassjahr 2000”, joint campaigns in Austria and Germany:

(a) on campaigning and co-ordination

We consider Jubilee 2000 to be an international movement resp.network of international campaigns, that have a agreed upon a number of very general but at the same time fundamental policy options (London co-ordinating meeting January 1998).

Jubilee 2000 campaigns are strongest, when they are autonomous and can adapt their concrete targets as well as policy strategies to their respective national circumstances. Even where we are aiming at international bodies like the World Bank or the IMF this happens through national governments.

Beyond this, however we should seek an optimal co-ordination of national campaigns, especially regarding international key events. This in turn, should mostly happen through a meaningful division of labor, f.i. by particular campaigns taking the role of lead agencies" regarding specific events.

Jubilee 2000" is a campaign with a narrow focus, and it must keep being that under any circumstances.

Co-ordinated jubilee 2000 action events should be the annual WB/IMF meetings, the several hundred days to the millenium, G8 meetings in Cologne and Japan, international days of Human Rights.

(b) on policy issues

Though we have many criticisms, HIPC is a starting point for us. We agree with its concentration on “debt sustainability” as the central element of any future debt management, but come up with our own definition of it.(see below). Countries will qualify on a case-by-case-basis; there is no automatic “unvoluntary” qualification, but governments do have to enter the process in a deliberate move.

Our deadline “by the year 2000" is one for political decisions, and not one for the complete implementation of those decisions, which in some countries may take longer than in others. Sticking to a symbolic deadline of, say 31.12.00, would put us under an unnecessary and unbearable pressure as it would make our success dependant on the implementation capacities and skills of creditor and debtor governments and agencies. Flexibility will be a major strength in that regard.

The reform of international debt management is genuinely part and parcel of the campaign targets. We want and need fair and transparent procedures in the place of actual creditor's dominance. The threat" of future impartial arbitration procedures in the case of default is also the best instrument for protecting borrowing societies from future “odious” or irresponsible lenders.

(c) on defining unpayable debt

J2000 campaigns must develop criteria indicating what they would consider to be unpayable debts. These criteria may change in the course of the campaign; we must however be able to state clearly what we aim at at any time. This does not only refer to sustainability thresholds and criteria, but includes also procedural aspects - which are also part and parcel of our campaign targets. The German and Austrian campaigns propose a 5% debt to exports ratio, drawing on the experience of a particularly successful debt reduction in German history.

It would make little sense to leave the definition of debt sustainability to debtor governments (as little as leaving it to multilateral and bilateral creditors). Equal treatments could then hardly be accomplished.

Ideally a procedure for defining debt sustainability should be worked out on a multilateral basis and then be implemented by arbiters which represent all stake holders.

At most an international body could serve for the working out of criteria - not for defining sustainability in particular cases. This would lead to a mammoth bureaucracy which would be neither more democratic nor more efficient than ad-hoc-procedures, carried out by the stakeholders themselves.

(d) on conditions

NGOs have often been said to advocate unconditional debt relief. This is not true, since the plea for transparency and accountability has been one of the major concerns of NGOs with regard to international financial relations in general and the handling of the debt crisis in particular. This presupposes that there are minimum conditionalities on governance and transparency, and we believe that these ought to be designed to include the most marginalized groups in the respective societies.

In this sense we find it useful and indeed necessary to define conditions.

This should, however, be done in the form of a fairly general framework, which leaves as much manouevering space as possible to national civil societies - provided it is sufficiently organised to make use of such a manouevering space. The Austrian/German campaign charter stipulates: The establishment of a counterpart fund, which is to receive payments from the debtor government in exchange for debt relief. However, the amount to be paid can vary from a symbolic peso to 100% nominal value. The amount will tend to the former in a situation, where civil society checks and balances can be established to monitor the behavior of a generally development oriented government; the latter should be applicable in extreme cases of bad governance (where capacity to pay is still an additional aspect).

Decision on this must be mainly taken by representatives of the particular civil society.

Jürgen Kaiser, 20.8.98, (translation and revision: 11.11.98)

Year of Relief 2000
Development needs debt cancellation

Erlassjahr 2000 Campaign-charter

And you shall hallow the 50th year and you shall proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you."

The foundations of the Year of Relief 2000" campaign:

1. Overindebtedness of people and countries threatens not only the social and economic well-being of those directly concerned, but also society at large.

The biblical year of relief protected debtors as well as creditors living in an ancient agrarian society by introducing periodic debt cancellations.

Returning arable land to indebted owners provided them anew with a basis for survival.

2. The responsibility for today's unbearable level of debt in many Southern countries does not only rest with the debtors, but with debtors and creditors alike.

Both parties must therefore act to the best of their abilities to restore the debtor's solvency . This principle is a standard one also in national insolvency regulations.

The campaign Year of Relief 2000" has two aims:

A Substantial debt relief for the world's poor countries by the year 2000.

The relief of the unpayable debt shall:

1. free the poor countries from unbearable debt burdens which their governments have contracted with Northern governments, banks and the International Financial Institutions;

2. allow for sustainable development in the future through a one-off cancellation of poor countries' unpayable debt by the year 2000;

3. counteract the unproportionally high transfer of resources from poor to rich countries;

4. pave the way for economic and social justice and the fulfillment of the most fundamental human rights in the poor countries.

5. halt the economic and social erosion of the poor and most indebted countries, and thus do away with one of the fundamental reasons for national and international conflicts and forced migration.

B The reformulation of international financial relations in order to establish a fair process between debtors and creditors (International Insolvency Law)

The International Insolvency Law shall

1 produce fair and equal relationships between international debtors and creditors by establishing fair and transparent procedures to replace current debt management practices which are characterised by the creditors' double role as judge and plaintiff;

2 foster all peoples' right to economic self-determination - especially the right to the basic means of subsistence.

3. define a new basis for international financial relations, which excludes future situations of overindebtedness.

Wuppertal, sept. 14th 1997

Commentary on the Campaign-charter Year of relief 2000 – Development needs debt cancellation

Debt Relief and Insolvency Procedure can be put into practice as follows

Re: Aim A

Extent of substantial debt cancellation in the year of relief 2000:

1. The unpayable portion of every low- and middle-income country's (by World Bank definitions) bilateral and multilateral debt shall be cancelled.

The unpayable portion of the foreign debt is to be defined as one which generates payments beyond 5% of the country's average export earnings during the years 1994 to 1996. The reduction of German foreign debt in the London Debt Agreement 1953 has proven this threshold to be an adequate one in order to offer countries sufficient relief for a fresh economic start.

2. This debt reduction shall be achieved through a comprehensive procedure in which all parties will participate. The procedure can be modelled after Chapter 9 of the US-Insolvency code which regulates insolvency procedures for municipalities and other sovereign bodies.

3.. Any debt due at the beginning of the procedure, as well as interest due on this debt shall be subject to the envisaged relief.

Regarding Aim B:

Procedure of Debt Relief by the Year 2000

1. Any country eligible for debt relief needs to apply for it.

Creditors and the debtor country's government nominate an equal number of arbitrators. These in turn nominate another arbitrator, so that the established court can take decisions by simple majority. The arbitration court can ask the United Nations, or another body considered impartial by the parties involved, to assume responsibility for monitoring the process.

2. Deliberations leading to the decision on the relief of unpayable debt must be public and transparent. All parties and persons affected by payment or relief of unpayable debt have the right to be heard by the arbitration court through their organisations or associations.

3. Any debt relief should be conditioned on the up-front payment of a fraction of the cancelled amount into a counterpart fund in the debtor country's national currency. The fund's purpose is to settle the social debt" of Northern and Southern governments alike towards the poorest members of the indebted societies. It will be used to cover the basic

material and social needs of the poorest people and to extend subsistence and internal market-oriented production.

An adequate participation of civil society in the fund's administration must be guaranteed.

4. Resources which have been lost through capital flight and corruption are to be made available through the active support of creditor countries. These funds shall be drawn upon for debt repayments. This also requires a new honesty on the part of the debtor countries' financial management.