Martin Khor the 61 year old Malaysian journalist and economist, is the Executive Director of the South Centre (an intergovernmental organisation of developing countries based in Switzerland), has published an article on the IPS News Service titled ‘Debt Crises, a Damocles Sword’. Khor states “The issue of foreign debt has made a major comeback due to the crisis in Europe, in which many countries had to seek big bailouts to keep them from defaulting on their loan payments. Before this, debt crises have been associated with African and Latin American countries. …European countries, notably Germany, insisted that private creditors share the burden of resolving the Greek crisis. They had to take a “haircut” of about half, meaning that they would be repaid only half the amount they were owed. It is increasingly clear that bailouts – where new loans are given to indebted countries to enable them to keep paying their old loans in full – are not enough and may be counterproductive, when the countries are facing a problem of insolvency and not just a temporary lack of liquidity. The restructuring of some of Greece’s debt that was owed to private creditors is an example of what needs to be done. However, the ad hoc restructuring undertaken in the Greek case is not enough. A more systematic framework needs to be made available to countries on the verge of debt default, with principles agreed to internationally. In the absence of this, unilateral debt restructuring will probably be messy, as when a country is forced by desperate circumstances to declare a default and propose its own debt restructuring, which may or may not succeed in getting its creditors to agree to the terms. …Though the debt crisis now has Europe as its epicentre, many developing countries may soon also be facing the same predicament.”  Inspired by Martin Khor, IPS News ow.ly/hLSP6 Image source iisd ow.ly/hLSOn Debt Crises a Damocles Sword (February 24 2013)

 

Martin Khor the 61 year old Malaysian journalist and economist, is the Executive Director of the South Centre (an intergovernmental organisation of developing countries based in Switzerland), has published an article on the IPS News Service titled ‘Debt Crises, a Damocles Sword’. Khor states “The issue of foreign debt has made a major comeback due to the crisis in Europe, in which many countries had to seek big bailouts to keep them from defaulting on their loan payments. Before this, debt crises have been associated with African and Latin American countries. …European countries, notably Germany, insisted that private creditors share the burden of resolving the Greek crisis. They had to take a “haircut” of about half, meaning that they would be repaid only half the amount they were owed. It is increasingly clear that bailouts – where new loans are given to indebted countries to enable them to keep paying their old loans in full – are not enough and may be counterproductive, when the countries are facing a problem of insolvency and not just a temporary lack of liquidity. The restructuring of some of Greece’s debt that was owed to private creditors is an example of what needs to be done. However, the ad hoc restructuring undertaken in the Greek case is not enough. A more systematic framework needs to be made available to countries on the verge of debt default, with principles agreed to internationally. In the absence of this, unilateral debt restructuring will probably be messy, as when a country is forced by desperate circumstances to declare a default and propose its own debt restructuring, which may or may not succeed in getting its creditors to agree to the terms. …Though the debt crisis now has Europe as its epicentre, many developing countries may soon also be facing the same predicament.”

 

Inspired by Martin Khor, IPS News ow.ly/hLSP6 Image source iisd ow.ly/hLSOn