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31 Mar 2015
Is Greek debt odious? – BBH
FXStreet (Barcelona) - Mark Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, introduces the concept of “odious debts” and further comments on reports citing violation or rules by IMF while lending to Greece and the ECB turning a blind eye during the crisis time.
Key Quotes
“There is a legal concept called "odious debts." It can be traced back more than a century.”
“The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired. The odious debt concept attempts to provide a moral and legal basis for rejecting in whole or part the debt incurred by the previous regime when the funds are sued in ways that are not beneficial, or actually harmful, to the interests of the population.”
“Legal scholars cite several types of sovereign debt that can be odious. Two common ones are "hostile debts" which are incurred to suppress a secessionist movement or to conquer peoples, and "war debts" which are contracted by a sovereign to finance a war that it loses and the victor is not obligated to pay the debt.”
“If Greece's debt is odious, it does not fit into these two categories. Yet the broad principles may still apply though the Syriza government has not explicitly called it such.”
“Both Greece's Prime Minister Tsipras and Finance Minister Varoufakis have argued that the previous governments should not have borrowed the funds that could obviously not be paid back.”
“Other reports have indicated that the IMF violated its own lending rules by extending so much credit to the Greece. DSK reportedly overruled staff and US objections.”
“There have also been reports indicating that the EU was well aware before the crisis had erupted that Greek figures did not add up but closed a blind eye due to narrow political considerations.”
“The Syriza government can make the case that funds borrowed since the 2010 were odious and against the interests of the people. The bulk of the new debt has been used to service past debt.”
“Through the SMP program, ECB bought out many private foreign creditors and then claims that the debt is exempt from the debt restructuring (PSI). A number of European officials have acknowledged that the new debt incurred by Greece was to keep its creditors whole.”
Key Quotes
“There is a legal concept called "odious debts." It can be traced back more than a century.”
“The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired. The odious debt concept attempts to provide a moral and legal basis for rejecting in whole or part the debt incurred by the previous regime when the funds are sued in ways that are not beneficial, or actually harmful, to the interests of the population.”
“Legal scholars cite several types of sovereign debt that can be odious. Two common ones are "hostile debts" which are incurred to suppress a secessionist movement or to conquer peoples, and "war debts" which are contracted by a sovereign to finance a war that it loses and the victor is not obligated to pay the debt.”
“If Greece's debt is odious, it does not fit into these two categories. Yet the broad principles may still apply though the Syriza government has not explicitly called it such.”
“Both Greece's Prime Minister Tsipras and Finance Minister Varoufakis have argued that the previous governments should not have borrowed the funds that could obviously not be paid back.”
“Other reports have indicated that the IMF violated its own lending rules by extending so much credit to the Greece. DSK reportedly overruled staff and US objections.”
“There have also been reports indicating that the EU was well aware before the crisis had erupted that Greek figures did not add up but closed a blind eye due to narrow political considerations.”
“The Syriza government can make the case that funds borrowed since the 2010 were odious and against the interests of the people. The bulk of the new debt has been used to service past debt.”
“Through the SMP program, ECB bought out many private foreign creditors and then claims that the debt is exempt from the debt restructuring (PSI). A number of European officials have acknowledged that the new debt incurred by Greece was to keep its creditors whole.”