The Jubilee Debt Campaign has welcomed the calls by former Governor of the Bank of England, Lord Mervyn King, for Greece to have a substantial proportion of its debt cancelled. Writing in the Daily Telegraph, Lord King has said:
“It is evident, as it has been for a very long while, that the only way forward for Greece is to default on (or be forgiven) a substantial proportion of its debt burden and to devalue its currency so that exports and the substitution of domestic products for imports can compensate for the depressing effects of the fiscal contraction imposed to date.”
Tim Jones, economist at the Jubilee Debt Campaign, responded:
“Lord King’s comments are yet another acknowledgment that Greece needs substantial debt cancellation, both for its own recovery, and the wider European economy. Yet even if implemented, the current discussions on debt relief for Greece would not reduce payments for at least 15 years, and would leave them 10 times higher than Germany was paying after it had substantial debt cancellation in 1953.”
In his article, Lord King also calls for the creation of “a mechanism by which international sovereign debts could be restructured” and said “Without one, an ad hoc international debt conference to sort out the external sovereign debts that have built up may be needed.”
Tim Jones, economist at the Jubilee Debt Campaign responded:
“The failure to create an international mechanism to cancel unpayable and unjust government debts means that reckless lenders keep being bailed out, leading to ongoing debt crises. In September 2015, the United Nations voted to adopt principles to help create such a mechanism, but this was opposed by six countries, including the UK, US and Germany. These governments should stop acting on behalf of reckless lenders, and allow the creation of the good governance of international debt the rest of the world wants.”
Lord King specifies that an international debt restructuring mechanism should be created within the IMF because it is ‘neutral’. Tim Jones responded:
“A debt restructuring mechanism for government’s does need to be neutral of lenders and borrowers. But this is exactly why it should not be housed within the IMF, which is itself a large lender, and is dominated by the US and European governments. It is this domination which means that the IMF keeps being used to bail out reckless European and US banks and speculators.”