Wed Aug 19th, 2009 at 07:11:48 AM EST
There is a long-standing precedent for countries refusing to pay "odious" debts - debts that were run up by repressive, colonial or otherwise illegitimate regimes. Similarly, a case can be made that countries who have been saddled with unpayable levels of IMF credit should be able to jettison these liabilities.
But. Odious debts don't just happen to happen from time to time. Somebody has to agree to borrow the money.
So it is clearly a necessary (but not necessarily sufficient) condition for repudiating debt as odious that somebody in the defaulting country goes to prison. In the case of countries emerging from colonial or otherwise repressive governments, it is fairly simple to tell who needs to go to prison: The dictator or colonial magistrate, sometimes his family, usually a number of military people too.
In the case of a country that has been shock therapied by the IMF, it is less clear who needs to go to prison. But the people who precipitated the crisis that caused the IMF to bail out foreign lenders seem like good candidates. And the politicians who signed up for the IMF programme should arguably serve some time too.
Promoted by Migeru
Specifically, in the case of Iceland, it is clearly odious to demand that their taxpayers foot the bill for the fraud and gambling that was going on in their banking sector. So the Brits who got defrauded should seek redress from the fraudsters and/or their own government.
On the other hand, Iceland can hardly claim debt relief on the grounds that the debt is odious until and unless it shows some willingness to actually prosecute the fraudsters responsible. This has, as far as I can tell, never been seriously considered (nevermind prosecuting the politicians whose treasonously stupid neo-liberalism allowed the fraudsters free reign - if you believe they'll ever see prison time, I have a Bear Stearns position I wanna