UN: EU Explanation of Position on the draft resolution on item 51c) External debt crisis and development

UN 61st Session; II Committee; Explanation of Position by Mr. Jarl-Håkan Rosengren, Minister Counsellor, Permanent Mission of Finland to the UN, on behalf of the EU on the draft resolution on item 51c) External debt crisis and development.

New York, 1 December 2006

Madame Chairperson,

I have the honour of delivering this Explanation of Position on behalf of the European Union.

The Acceding Countries Bulgaria and Romania, the Candidate Countries Turkey, Croatia* and the former Yugoslav Republic of Macedonia*, the Countries of the Stabilisation and Association Process and potential candidates Albania, Bosnia and Herzegovina, Montenegro, Serbia, as well as Ukraine and Moldova align themselves with this declaration.

The EU is pleased to join the consensus on this resolution.

We appreciate the hard work involved from all parties and by the Facilitator, Mr Marcelo Suáres Salvia of Argentina.

The resolution acknowledges that during the last few years the external debt position of developing countries has improved. Progress continues on reducing the debt burdens of the poorest countries, particularly those in Africa, mainly through the HIPC Initiative, the Multilateral Debt Relief Initiative, and debt relief provided by the Paris Club. The EU-member states provide the lion share of debt relief to the poorest countries.

Although there are still a number of low- and middle income countries that are still facing difficulties in finding durable solutions to their external debt problems, it is however fair to say that we are not facing an external debt crisis.

Debt relief has provided many low income countries with additional resources that can be used to make progress towards the MDG’s. It is important that countries do not slip back into a situation of unsustainable external debt caused by excessive borrowing, leading to yet another lending-forgiveness cycle. New borrowing should not undermine long-term debt sustainability. Borrowers and creditors should adhere to responsible lending. Also official creditor’s coordination should be enhanced.

The resolution we have just adopted is the result of difficult negotiations. All delegations had to compromise. The resolution contains many good provisions. However there are also elements the EU found difficult to accept. I would like to mention just two. Firstly, the title of the resolution: ‘External Debt Crisis and Development’. No consensus could be reached to change the title of the resolution although there was general agreement that we are not facing an external debt crisis and that the scope of the resolution has become much broader than just external debt crisis. It comprehensively addresses a whole range of issues related to external debt. We intend to revisit this issue again next year and hope that we will be able to have a substantive discussion.

Secondly, during the negotiations the EU expressed its concerns regarding the phrase ‘cancellation of 100 percent of the official multilateral and bilateral debt of heavily indebted poor countries’ in OP12. The EU reluctantly accepted this paragraph because it is agreed language from resolution A/60/265 ‘Follow-up to the development outcome of the 2005 World Summit’. The ultimate goal of debt relief is to reduce debt burdens to sustainable levels; not to fully cancel debt. The reference to a 100 per cent cancellation of the debt of HIPC countries is not in line with the HIPC Initiative, which is based on allowing HIPC countries to recover a sustainable level of debt. Bilateral efforts beyond HIPC do exist, but they are not mandatory nor do they represent a 100% cancellation of all debt. The EU will revisit this question in the next GA.

Thank you Madame Chairperson.

*) Croatia and the former Yugoslav Republic of Macedonia continue to be part of the Stabilisation and Assoiciation Process.