Excerpt of ‘Resolving International Debt Crises Fairly‘, published in ‘Ethics & International Affairs’ (Volume 17.2), September 15, 2003, by Ann Pettifor: … The only process needed for the resolution of a debt crisis and the establishment of an ad hoc panel is political will, on the part of both the debtor and G-7 official creditors (who will in turn require the support of private creditors). In doing so, the G-7 creditors will have to overcome the strong incentive of private creditors to resist any proposals for restructuring debts that limit their current control over the process. At the same time the process must respect the rights of creditors by giving them an equal voice in negotiations with the debtor and by not discriminating among them in a way that benefits some creditors and disadvantages others.
A UN resolution may be required to secure the cooperation of UN staff who would provide the independent oversight of the framework and develop principles for determining sustainability levels. Were the G-7 to implement an ad hoc, independent, and transparent process, it would then be able to mobilize the active participation of the IMF for the provision of working capital, known in the U.S. legal code as debtor-in-possession finance. The IMF would thus have its original mandate restored – to provide financial support in crises, and to correct, rather than precipitate, imbalances, thereby fostering stability and growth in the international economy.
A review of the history of bankruptcy law in the United States reveals that it was only when rich debtors needed protection from their creditors after the major external economic shocks of the late eighteenth century that a body of law began to evolve that respected the rights of the debtor as well as the interests of the creditor.12 So long as rich countries are protected from their creditors through, for example, the power to print the currency in which they repay their debts, so long will they be reluctant to develop a just framework for resolving international debt crises. Indeed, it may be that a rich country needs to encounter a major debt crisis before we can expect a new framework to evolve and justice to be achieved in international financial relations. This is regrettable since just, economically efficient, and effective frameworks for resolving debt crises are both feasible and available. (Read the whole long article on this page of Carnegie Council).