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close this bookPutting Life Before Debt (CI - CIDSE, 1998, 38 p.)
close this folderPART III: CIDSE/Caritas Internationalis Position on International Debt
View the document(introduction...)
View the document1. Cancel the unpayable debt by the year 2000
View the document2. Improve the HIPC Initiative
View the document3. Link debt cancellation with investment in human development
View the document4. Ensure decisions on debt relief are made in a transparent way
View the document5. Change the Structure of International Financial Relations

5. Change the Structure of International Financial Relations

The pattern of international financial relations must be reformulated fundamentally to establish a fair process between debtors and creditors. Current debt management practices are characterized by the creditors' double role as judge and plaintiff. They do not reflect the fact that the responsibility for today's unbearable burden of debt in many Southern countries rests not only with debtors but with debtors and creditors alike. Therefore, the current practice should be replaced by a fair and transparent procedure that provides a framework for fair and equal relationships between debtors and creditors.

The introduction of an international insolvency/bankruptcy procedure8 has been proposed as one possibility to achieve these fundamental changes. It could be modeled after experiences of local governments in the US which are entitled to legal protections from their creditors if they become insolvent/bankrupt. (A similar procedure was introduced in Hungary in 1996.) One major element of an international procedure would be to establish neutral courts of arbitration that allow those affected to voice their views and concerns regarding the impact of the proposed solution.

BOX 6:

BANKRUPTCY PROTECTIONS FOR LOCAL GOVERNMENTS IN THE US

When a local government such as Orange County in California declares bankruptcy, neutral arbitrators - not creditors - preside over the hearings. The debtor is granted Chapter 9 protection, in which:

1. Government expenditures for basic services are maintained

2. Any tax increase must be necessary and feasible. Taxes cannot be increased without regard to their impact on the debtor population.

3. Creditors receive payments of what can be reasonably expected under the circumstances

4. Public officials are held personally responsible for illegal acts

5. Debtors, creditors, and taxpayers have the right to be heard before a court


6. The court cannot interfere with the municipal government's decisions regarding which services and benefits to provide citizens.