Brussels, 15 August 2013
Norwegian debt audit puts new pressure on European creditors
A Norwegian debt audit report published today in Oslo find that past Norwegian lending practices were not compliant with the current United Nations principles on responsible lending. The audit assessed the legitimacy and responsibility of Norwegian loans to dictatorships and autocratic regimes in countries including Egypt, Indonesia and Myanmar/Burma. This first ever creditor audit of loans to developing countries aims to improve Norway’s future lending practices. The Norwegian Coalition for Debt Cancellation, a Eurodad member, called on the Norwegian government to cancel the illegitimate loans immediately.
Eurodad and its member organisations from across Europe have been watching European governments’ lending practices for decades: “We know many cases where European governments provided loans to autocratic regimes and dictators and helped them to stay in power. European loans financed the exports of weapons made in Europe, which, in many cases, are used to oppress populations. European export credits finance the dumping of overpriced and inadequate European products in poor countries”, says Bodo Ellmers, an expert for debt and responsible finance at the European Network on Debt and Development (Eurodad). “Often such loans are even declared as aid.”
The problems with irresponsible lending are well-known to the European institutions in Brussels. The European Commission, in a recent communication on financing for development, called on “all actors to apply responsible lending and borrowing principles”. However, it did not explain how this will be achieved in practice.
“It is obviously an embarrassment for the European Union that the only European nation that is currently making credible moves towards more responsible lending is Norway – which is not even an EU Member State,” says Ellmers. It is now time for the EU to catch up, and to conduct similar debt audits as the Norwegians. “We know that some European governments have skeletons in their cupboards. Citizens in Europe and beyond have the right to know the true picture,” stresses Ellmers.
Developing countries that managed to liberate themselves from dictators, as recently happened in Egypt or Tunisia, continue to suffer from high debt burdens caused by illegitimate debt. Eurodad is calling on these illegitimate debts to be cancelled immediately and without conditions “It is long overdue that all European nations should cancel the dictators’ and other illegitimate debts of poor countries,” says Ellmers. “We need to make sure that these young democracies and poor countries can have a fresh start.” Illegitimate debt impedes poor countries’ development and contributes to the conflicts and instability that we see today in countries such as Egypt.
Cancelling illegitimate debt is also key to making European aid to poor countries effective. Currently, new aid to poor countries often finances the repayment of illegitimate debt: “European aid is often just a bailout package for irresponsible lenders”, says Ellmers. “This is a classic problem of collective action: good donors’ aid finances debt repayments to dodgy creditors. The European Parliament and the Commission must ensure that responsible financing becomes binding for everyone in the EU.
For interviews and further information, contact:
Brussels: Bodo Ellmers – Senior Policy Officer, European Network on Debt and Development (Eurodad)
Oslo: Gina Ekholt – Director, Slett U-landsgjelda (SLUG) – The Norwegian Coalition for Debt Cancellation
Notes to the editor:
Eurodad (the European Network on Debt and Development) is a network of 48 non-governmental organisations from 19 European countries working on issues related to debt, development finance and poverty reduction. Since it was founded in 1989, Eurodad has been campaigning for the cancellation of illegitimate debt and unsustainable debt.
Norwegian debt audit: In 2012 the Norwegian government commissioned an official audit to evaluate whether the developing country debt currently owed to Norway resulted from irresponsible lending. The audit that was conducted by the consultant firm Deloitte has employed the UNCTAD Principles for Promoting Responsible Lending and Borrowing to evaluate the claims.
The European Commission’s Communication COM(2013)
531 final, entitled Beyond 2015: towards a comprehensive and integrated
approach to financing poverty eradication and sustainable development,
published on 16 July 2013, underlined “the need for all actors to apply
responsible lending and borrowing principles to ensure debt sustainability”. Link
Responsible financing: European non-governmental organisations have developed a set of principles to ensure that development loans to developing countries are responsible and effective. For more information, download The Eurodad Responsible Finance Charter. Link