Bodo Ellmers, Guest Blogger
Bodo Ellmers is a Policy and Advocacy Manager at the European Network on Debt and Development (Eurodad).
The UN General Assembly has passed a landmark resolution that mandates the UN to create a “multilateral legal framework for sovereign debt restructuring.” Promoted by the G77 countries and triggered by the aggressive “vulture funds” lawsuits against Argentina, this resolution could be a game changer for the way future debt crises are managed. First and foremost, it has shifted the forum for political debate away from the International Monetary Fund (IMF) towards the UN. However, shamefully, the EU’s vote was split over this crucial decision.
The path towards a real debt restructuring regime
It is certainly not news that the lack of a legal framework for sovereign debt restructuring—a state insolvency regime—has been a gaping hole in the international financial architecture. Prominent economists such as Joseph Stiglitz, senior officials such as the IMF’s former Deputy Director Anne O. Krueger, and civil society campaigners have pointed again and again to this lack.
However, governments from both debtor and creditor countries have so far been reluctant to put their political weight behind any meaningful initiative. The most relevant political commitment is probably the Monterrey Consensus’ vague commitment to “consider” new debt-workout mechanisms. The most relevant practical work, on the other hand, was the IMF’s concept for a Sovereign Debt Restructuring Mechanism, which was shelved 11 years ago when it faced a political deadlock in the U.S.- and EU-dominated IMF Executive Board.
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Political leaders of developing countries gathered in the Bolivian city of Santa Cruz last week to commemorate the 50th anniversary of the Group of 77, the main umbrella organisation of the South.
Presidents, Prime Ministers, Foreign Ministers and Ambassadors from a hundred countries celebrated the event with speeches and a declaration that pledged their continued fight for a fairer world order, but also to improve the condition of life of their people.
President Evo Morales of Bolivia, who hosted this G77 summit gave a stirring speech enumerating nine key tasks that lie ahead for the developing world, and chaired the meeting of interesting reflections from leaders on what the South has achieved so far, the present crises and big challenges ahead.
On June 15, 1964, when most developing countries had just emerged from colonial rule, the officials of 77 developing countries met and issued a joint statement announcing the birth of the G77, at the first ever meeting of the UN Conference on Trade and Development in Geneva.
In that historic statement, the developing countries pledged to promote equality in the international economic and social order and promote the interests of the developing world, declared their unity under a common interest and defined the Group as “an instrument for enlarging the area of cooperative endeavour in the international field and for securing mutually beneficent relationships with the rest of the world”.
Fifty years later at Santa Cruz, on June 14 and 15, the leaders affirmed that the developing countries need to unite under the G77 even more than before, as the global economy is in turmoil and the world order remains still imbalanced against their interests.
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