Pope Francis called for an international bankruptcy process in a news conference as he left Latin America on Monday. According to the Associated Press, when asked about the Greek debt crisis, Francis stated, "if a company can declare bankruptcy, why can't a country do so and we go to the aid of others?" Francis offered further comments noting that too many countries are struggling with high debts and he suggested a United Nations bankruptcy proposal could be the solution.
“Pope Francis knows that heavy debt loads cause poverty and inequality,” said Eric LeCompte, who consulted the Vatican on its position. LeCompte is the head of the religious development organization Jubilee USA Network. “The Pope's statement is a logical extension of the Catholic Church's strong support of debt relief for struggling countries."Common Dreams
Pope Francis Calls for Global Bankruptcy Process
Jubilee USA Network
3 comments:
In one sense this makes sense. But when you then ask more detailed questions about how you determine what a whole country's assets are, and what it's economic potential is, it becomes hard to see how this question about bankruptcy would be answered other than in a crudely political manner.
If I'm a company with a $50 million dollar debt, and I own a property in the Philippines worth $100 million, then I'm not bankrupt. I can sell the property and pay my debt. The country of Greece owns all sorts of immensely valuable assets it could sell to pay its debts. So is it bankrupt? Doubtful. Do we want countries selling their national patrimony and treasures to pay their debts? No.
The Pope is right that somehow we need a better procedure for getting countries like Greece back working with a clean slate. But I don't know if the bankruptcy model cuts it.
"But when you then ask more detailed questions about how you determine what a whole country's assets are,"
The country's assets belong to the people. The government leases them from the people for the term of office.
What you're missing here is that an international bankruptcy process sets the ground rules for what creditors can *expect*, and that means that international lenders are not under any illusion as to what backs the money they are lending.
Arguably government debt in a foreign currency should be lent to the government and it disappears when the government goes 'bust' (i.e. when it is defeated in an election).
If there had been in place a Eurozone 'chapter 11' process, then there would have been no argument in Greece. The government would have fallen, the debts written off and things would have continued afresh.
And of course nowhere near as much would have been lent in the first place.
As John Perkins relates in his book about being an "economic hit man," the purpose of loading up small, weak countries with debt is to loot them. It's a game plan.
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