Probe International Canada, Eurodad, CRBM Italy, Erlassjahr Germany, Plate-forme Dette et Développement France, PARC Japan, Jubilee USA, and Jubilee Debt Campaign UK.

February 9, 2007

If the Group of Seven (G7) nations are serious about cleaning up corruption and promoting good governance and transparency, they should look to the past.

A damning new NGO report presenting case studies of past loans made by the Group of Seven nations (Canada, France, Germany, Japan, Italy, the U.K. and the U.S.), reveals that some loans are not legitimate and that the lenders are at fault.

The loans the report documents were found to be based on irresponsible lending decisions and are therefore illegitimate, the report claims. According to its findings, money was lent to regimes the G-7 governments knew to be corrupt or repressive to buy political allegiance, or loans were made to help rich country companies do business abroad in unviable projects.

The report argues that some debts should not be paid because “creditors bear a large part of the responsibility for having extended loans irresponsibly and negligently.”

“Creditors need to be held accountable for the bad decisions they have made and share responsibility for mistakes,” said Gail Hurley, a policy officer with the European NGO Eurodad.

“Northern politicians are obsessed about corruption and ensuring that taxpayers’ money is well-spent and not wasted by corrupt elites. These are valid concerns. But our governments have no credibility unless they apply these principles to the past,” she said.

Dubious debts: the cases the report reveals

Germany exported warships to Indonesia during the Suharto regime despite concerns over how the vessels would be misused in internal conflicts.

Japan supported the development of an aluminium project in Indonesia designed to serve the interests of Japan’s aluminium exporters and did not benefit Indonesians.

Italy sold three hydroelectric turbines to Ecuador when only two were needed and despite evidence that the hydropower plant was unviable and had devastated the local environment and communities.

France was complicit in the stripping of Congo-Brazzaville’s oil wealth by French banks and failed to stop it. ElfCongo benefited from loans from France’s development agency despite widespread concern that oil was disappearing.

The United States supported the development of a nuclear power station on an earthquake faultline in the Philippines.

The UK government guaranteed a commercial bank loan for a UK company which was providing consultancy services to Kenya at over five times the price these services should have cost.

Canada supported the construction of the Yacyretá dam in Argentina and Paraguay despite widespread allegations that the military dictatorships were siphoning off billions of dollars from the project.

Each case study argues that these debts are illegitimate and should be investigated immediately via public and impartial audit processes. The report urges the G7 to follow Norway’s bold lead and accept shared responsibility for the debts.

Click here to read the full report in .pdf format