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Urgent need for foreign-debt controls

06 September 2013

by a staff reporter


To the letter: "Life before Debt" campaigners protest outside HM Treasury in London on Wednesday, ahead of the G20 summit in St Petersburg

To the letter: "Life before Debt" campaigners protest outside HM Treasury in London on Wednesday, ahead of the G20 summit in St Petersburg

A NEW "debt league" ranks Britain at number four in the world when it comes to foreign debt that is owed by the private sector.

The league was compiled by the Jubilee Debt Campaign, using data on overseas borrowing by private firms and consumers, as well as by the UK Government.

The foreign debts owed by Britain's private sector (mainly the banks) amount to 364 per cent of GDP, the charity says. Ireland tops this private-sector league with debts worth 900 per cent of GDP. Taking into account only the Government's foreign debt, the UK drops to 98th place.

The most indebted nation in the world, ranked on net government debt, is the Seychelles archipelago, which received an IMF bailout in 2008. Close behind it is Portugal, Ireland, Greece, and Spain, all victims of the eurozone crisis. Top of the league of net creditors are Singapore, Switzerland, and Saudi Arabia.

The economist for Jubilee Debt Campaign, Tim Jones, who did the calculations, says: "Often people only focus on how much debt is owed by a government. . . This ignores the debt owed by private companies, including banks, even though that was the main cause of the current financial crisis.

"Debts owed between countries are at the root of current crises in Europe, as well as in Jamaica, Pakistan, and El Salvador. But . . . our figures also show the big creditor countries, including Germany, Saudi Arabia, and Nor- way, whose surplus status is just as much a problem to the global economy." The big lenders created a global boom-and-bust cycle, he said.

Austerity, according to Mr Jones, would do nothing to help the UK's financial crisis. "We need to regulate lending between states, including by private companies and banks. In the 1950s and 1960s, when such regulations existed, debts were far lower, growth was higher, and there were hardly any debt crises."

Jan Toporowski, Professor of Economics and Finance at the University of London, said: "This is the untold story behind developments in international banking and finance, a story that shows that these are not just everyday transactions helpfully carried out by interna-tional banks as a benefit to the world in general. The data shows the legacy of debt that is the conse- quence of international transactions carried out without a proper system of debt management. They highlight the most urgent issue in international finance."


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