Thursday, September 10, 2015

UN votes on debt framework

Countries vote at the General Assembly last year over the proposal of a new debt framework.

Question of whether US, Europe will back measure

The United Nations General Assembly will vote today on a new legal debt framework for sovereign debt restructuring, an initiative that was sparked by Argentina’s debt battle with its holdout creditors and presented last year by Bolivia on behalf of the Group of 77 (G-77) developing nations and China.

A large number of positive votes are expected for the initiative today at the General Assembly, where Economy Minister Axel Kicillof and Foreign Minister Héctor Timerman are expected to be present. The framework includes nine key principles to avoid actions of the “vulture” funds. All eyes will be on what decision the United States and European countries take on the vote after largely rejecting it or abstaining last year.

“The few countries that voted against the initiative represent seven percent of all the countries that participate in the General Assembly. I hope the international community sends a message through its vote,” Argentina’s Ambassador at the UN María Cristina Perceval said yesterday. “It will have a political impact. The sovereign immunity of states will be hard to ignore after today’s vote.”

Among the principles agreed to in July that will be voted on today, the UN committee said sovereign immunity on debt restructuring is a right of states before foreign domestic courts and exceptions should be restrictively interpreted. Argentina has long argued that stance during its legal battle with holdout creditors.

At the same time, the committee said sovereign countries also have the right to design their own macroeconomic policy, including restructuring its sovereign debt. That principle extends to restructuring, which should not be frustrated or impeded by any abusive measures, and that should take place as a last resort by the country.

There must be “good faith” by the country and by all its creditors to engage in “constructive” debt restructuring negotiations, according to the committee, with the goal of a “prompt and durable reestablishment of debt sustainability and debt servicing,” as well as achieving the support of a critical mass of creditors through a constructive dialogue regarding the restructuring terms.

The UN voted last year overwhelmingly in favour of a proposal to create the framework as part of an initiative that was only rejected by the United States, the United Kingdom, Japan, Canada, Australia and Germany. Although few countries voted against, 41 chose to abstain — including most European states.

The initiative was also backed by a group of 19 world-renowned economists, including French author of Capital in the Twenty-First Century Thomas Piketty and former Greek Finance minister Yanis Varoufakis, who wrote an open letter on Tuesday calling for European countries to back the initiative and questioning the actions of “vulture” funds.

Herald with Télam