To finance development, many poor countries have to take recourse to external loans. By itself this is not bad or dangerous because the debt can be used to , f. i., invest in infrastructure, raising the output of the economy.
But if loans are taken and given without considering the economic capacity of the debtor, the repayment could become a problem. In the 1970s and 1980s this led to the so called “Third World Debt Crisis”. Today we can observe a similar trend: Poor countries in Africa, Asia and Latin America have comparatively easy access to fresh money because low interest rates in the Global North make investments in the Global South very attractive.
Rules for responsible borrowing and lending are important since they make clear, that creditor and debtor share responsibility for the success of the lending operation.
1. Outcome of the G20 Finance Ministers' meeting erlassjahr.de and international colleagues staged action outside the Baden Baden casino in March, in order to demonstrate how rising debt levels suffocate poor countries' economies. Still, the ministers' communiqué makes only scant reference to global debt problems; one of these references, however,…Mehr lesen ...
20 people dressed in the flags of the Debt20-countries, about 150 activists, many journalists and camera teams and – as expected – not one finance minster to perform a symbolical debt relief. Jürgen Kaiser, who is the policy coordinator of Jubilee Germany, held a speech directly opposite the Baden-Baden “Kurhaus”…Mehr lesen ...