G7 expected to ease debt burden

Leaders of the world's richest nations gather in Cologne today for a summit that could determine the future of millions of the poorest people on Earth. The Group of Seven (G7), made up of the world's biggest industrial nations, is expected to agree on a package of measures aimed at reducing the burden of debt that is crippling the economies of poor countries.

Campaigners on behalf of the poor welcome the fact that the richer countries are willing to consider debt forgiveness but they fear that the G7 initiative will not go far enough to make a real difference to the most heavily indebted countries.

Trocaire's Ms Caoimhe de Barra argues that, by looking at the problem of debt relief as a question of how much the rich countries can afford, the G7 leaders are missing the point.

"Our perspective is what the needs of the developing countries are. So we're obviously coming from completely different points," she said.

Finance ministers from the G7 have already agreed most of the details of the relief package, which would cut approximately $70 billion (€68 billion) from the debts owed by 36 of the world's poorest countries. The conditions under which countries qualify for debt relief will be relaxed substantially but the creditor nations insist that money freed up by the reduced debt burden must be spent in a way they regard as prudent.

The debt crisis has its origins in the 1970s when high commodity prices - for goods such as sugar and cocoa - encouraged developing countries to borrow huge sums from foreign banks and governments. Commodity prices fell sharply in the 1980s and interest rates rose, multiplying the burden of debt on the poorest countries. Many developing countries spend twice or three times as much servicing their debt than they do on such essential services as hospitals and schools.

The International Monetary Fund (IMF) and the World Bank decided in 1996 to launch an Initiative for Heavily Indebted Poor Countries, known as HIPC. Debt cancellation would be funded mainly by selling some of the IMF and World Bank gold reserves but the richer countries could not agree on which countries should qualify for debt relief.

Germany's former chancellor, Dr Helmut Kohl, was steadfastly opposed to relieving debt, arguing that it was morally right to insist that loans should be repaid in full. Germany's new, centre-left government has overturned this policy, forming an alliance with Britain's Chancellor of the Exchequer, Mr Gordon Brown, to put debt relief at the top of the G7 agenda.

The launch of Jubilee 2000, a campaign for debt relief that has attracted the support of such public figures as Bono, Salman Rushdie and the Pope, increased pressure on the G7 leaders to take action. Jubilee 2000 has collected millions of signatures from all over the world - including almost 800,000 from Ireland - for a petition demanding a speedy end to the debt crisis.

More than 100 Irish activists will be among the 50,000 people who will form a human chain around Cologne's city centre tomorrow before handing some of the signatures to Chancellor Gerhard Schroder on the banks of the Rhine.

Ms de Barra believes that this weekend's meeting offers the G7 leaders a unique opportunity to take action that will have an important, practical impact on the lives of millions of people.

"Tanzania, for example, spends four times more on debt servicing than it does on health. So if a portion of the debt servicing could be freed up and put into health, it would have a tangible, understandable effect for people on the ground. Clinics could be stocked with medicines, nurses could be trained and you could avoid loss of life and lots of misery," she said.