Skeletons in the Cupboard: Illegitimate Debt Claims of the G7

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Eurodad
February 9, 2007

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NGOs in the G7 countries have released a damning new report which argues that if the G7 is serious about corruption, good governance and transparency, it should apply these principles to the past. The report highlights cases of illegitimate debts being claimed by Canada, France, Germany, Japan, Italy, UK and USA. These loans were the result of irresponsible lending. Money was lent to regimes G7 governments knew to be corrupt or repressive to buy political allegiance, or they were loans designed to help rich country companies do business abroad in unviable projects.

The report argues that some debts should not be paid. This is because creditors bear a large part of the responsibility for having extended loans irresponsibly and negligently. Gail Hurley, Policy Officer at EURODAD said, "creditors need to be held accountable for the bad decisions they have made and share responsibility for mistakes. Northern politicians are obsessed about corruption and ensuring that taxpayers' money is well-spent and not wasted by corrupt elites. These are valid concerns. But our governments have no credibility unless they apply these principles to the past. It is not acceptable for the G7 to preach good governance to developing nations while at the same time collecting debts that were irresponsibly made".

Dubious debts: the cases

Germany exported warships to Indonesia during the Suharto regime despite concerns over how the vessels would be misused in internal conflicts.

Japan supported the development of an aluminium project in Indonesia designed to serve the interests of Japan's aluminium exporters and did not benefit Indonesians.

Italy sold three hydroelectric turbines to Ecuador when only two were needed and despite evidence that the hydropower plant was unviable and had devastated the local environment and communities.

France was complicit in the stripping of Congo-Brazzaville's oil wealth by French banks and failed to stop it. ElfCongo benefited from loans from France's development agency despite widespread concern that oil was disappearing.

The United States supported the development of a nuclear power station on an earthquake faultline in the Philippines.

The UK government guaranteed a commercial bank loan for a UK company which was providing consultancy services to Kenya at over five times the price these services should have cost.

Canada supported the construction of the Yacyretá dam in Argentina and Paraguay despite widespread allegations that the military dictatorships were siphoning off billions of dollars from the project.

Each case-study argues that these debts are illegitimate and should be investigated immediately via public and impartial audit processes. The report urges the G7 to follow Norway's bold lead and accept shared responsibility for the debts.