NORWEGIAN GOVERNMENT CANCELS ILLEGITIMATE DEBT, SETTING SIGNIFICANT NEW PRECEDENT

Oct 7, 2006
by Soren Ambrose

On Tuesday, October 2, the Norwegian government took the unprecedented step of canceling debt it claimed of several countries on the grounds that it was incurred illegitimately. The debts were incurred in the late 1970s, when Norway was trying to salvage its own ship-making industry by offering credit to South countries which could then use it to purchase the ships.

It is quite unusual for a non-revolutionary government to repudiate the actions and policies of its predecessors (the U.S., for example, is still debating whether to apologize for slavery …). It is even more unusual for a government to take practical steps to rectify the consequences of those actions. (It is, however, not clear if the Norwegian government intends to refund the payments already made on these debts.)

What is most important, as the Norwegian Jubilee campaign pointed out in its press release, is that "Norway has now broken the unspoken rule of creditor solidarity. Creditors have until now banded together to insist that poor countries repay their debts and have refused to admit that they share some responsibility for having extended loans irresponsibly, often for geopolitical strategic purposes."

The usual vehicle for creditor countries is the "Paris Club" of wealthy countries that meets in virtually constant session to set policy on bilateral debts. It reviews countries on a case-by-case basis and comes up with collective determinations on how to deal with debt problems. While it often cancels large percentages of the debt, it never cancels 100%, and it certainly never questions the legitimacy of the original loans or the system that has perpetrated the debt crises for 30 years.

As the annex to the government's press release states, "The unilateral cancellation of the ship export debt will be implemented outside the cooperative framework of the Paris Club of creditor countries. In this particular case the Government finds that there is good reason for Norway to take an independent stand."

Unfortunately, but unsurprisingly, the document goes on to say that this is a one-time occurrence, and that the Norwegian government will continue to participate in and abide by Paris Club decisions on "all future debt forgiveness."

The Norwegian government has been careful to avoid the use of terms like "illegitimate" or "odious" or "illegal" to describe the debt it is canceling, which is unfortunate, as it would have made the precedent a stronger and more useful one for debt campaigners. But although it doesn't use the terms, it uses the logic of illegitimacy, and in that regard sets what is still a very valuable precedent, and one that campaigners will be using to pressure other bilateral and multilateral creditors as they go forward.

Below are (1) The press release from the Norwegian government; (2) The press release from the Norwegian Jubilee campaign; and (3) The annex to the Norwegian government's press release (described as a factsheet).

[Soren Ambrose for 50 Years Is Enough Network]

^TOP

50 Years Is Enough Network - 3628 12th St NE, Washington, DC 20017 USA
Tel: 202-IMF-BANK (202-463-2265) Email: info@50years.org