3 European nations offer debt writeoff

MANILA, Philippines - Germany, Spain and Italy have offered to condone or write off part of the loans the Philippines owes these countries as long as the funds are earmarked for development projects and programs the lending countries want the government to undertake, Pangasinan Rep. Jose de Venecia Jr. revealed yesterday.

The former House speaker said Germany is willing to write off 25 million euros (more than P1.6 billion) provided that the administration spends an equal amount for campaigns against acquired immune deficiency syndrome, malaria and tuberculosis.

He said the German embassy has communicated the offer to the National Economic and Development Authority.

“It’s now up to the concerned officials to respond to the German government’s gesture,” he added.

As for Spain and Italy, the former speaker said the two European nations have expressed readiness to make a similar debt write-off.

“But they have yet to specify the amounts and the projects or programs for which the peso counterpart funds would be spent,” he said.

He said administration officials would have to make follow-ups with Spanish and Italian representatives here.

The offers were in response to De Venecia’s incessant calls for rich nations to help poor countries by way of debt-to-equity conversion or a debt-swap like the proposed German-Philippine arrangement.

“Finally, after years of trying, we had a breakthrough,” the former speaker said.

He said aside from Germany, Spain and Italy, other developed countries have endorsed his proposals but have not moved forward in helping poor countries with their debt burden.

De Venecia launched his campaign for debt conversion in 2005 when he was still Speaker. That year, President Arroyo spoke before the United Nations and endorsed his proposals. The two were still allies then.

De Venecia’s debt-to-equity conversion proposal calls for lenders to convert as much as 50 percent of their loans to debtor-nations into equity in infrastructure and other productive projects.

This will ease the debt payment problems of debtor-countries and free up billions of dollars for job generation. In the case of the Philippines, more than P600 billion is appropriated this year for debt principal and interest payments – about half for principal and half for interest.

Debt-swap, on the other hand, is like what Germany is offering: the lender condones a certain amount of debt provided the borrower spends the equivalent in local currency for a project the lender specifies.

De Venecia has recently written British Prime Minister Gordon to urge the British government to jointly lead with the United States the campaign for debt assistance to poor nations.

He said debt conversions and debt swaps could be the “only workable global stimulus package for poor countries and heavily indebted economies caught in the global financial crisis.”

“There will be no need for new appropriations by the British, European, US, Japanese, Chinese, and the other parliaments of creditor-nations. Our plan is voluntary and does not ask foreign creditor to forgive a single dollar or euro of debt,” he said.

He said debt assistance would help borrowers achieve the United Nations’ millennium development goals (MDGs), which aim to halve poverty around the world by 2015.

He said global financial crisis could wipe out poor nations’ gains in reducing poverty.