Public Relations – Why attacking a Country Could Create a Problem in the International Community
In international law, odious debt, or simply debt in arrears, is an idea that states that a despotic country’s national debt should not be enforceable by its courts. This doctrine considers such debts as personal debts of that regime to be incurred and not federal debts of the nation. Thus, if the debtor fails to satisfy the collection agency that has requested the money, the court is allowed to do so. If the collection agency is unable to do so, they lose their right to collect from the debtor. Such a clause is not part of any customary law and was introduced with the aim of discouraging certain practices by collection agencies which were used to force payment out of citizens.
The aim of this new law was, and still is, to protect citizens from abusive and exploitative behavior by collection agencies. Some of these practices were already illegal under certain circumstances, but this new law merely codified existing statutes and requirements. A few countries have criminalized the failure to pay a debt by making it a criminal offense punishable by heavy fines. But, in most of these countries, this does not mean that someone will go to jail merely for not paying his or her taxes.
There are several reasons why a nation would want to encourage citizens to not use illicit tactics to force payment of debts: One is to ensure that the taxes which the government receives is sufficient for the social welfare programs and the fulfillment of other responsibilities. Two, the regime wants to encourage commercial activity in the country so that the tourism industry can flourish. Three, it is very important for a country to avoid the accumulation of too much debt since then there would be a risk of default on the national loans, which would then lead to the case of defaulting on the loans of other foreign banks.
However, there are mixed reactions to the new law in Germany. The business community is happy that the government does not want to antagonize big businesses. Another reason why the business community is pleased is that the new rules go some way toward protecting Germany from odious debt. For instance, the new regulation requires the commercial banks to consider a borrower’s ability to repay even if this means that the borrower will have to accept a higher interest rate. As it stands now, most lenders prefer to lend money to people who can pay it back quickly, and they are usually more concerned about the safety of such loans.
This same doctrine applies to other nations with sovereign debt: If a country finds itself in a situation where it cannot easily repay its loans, it must try very hard to persuade the creditors that it should be allowed to borrow more money. This approach is used to persuade governments in other countries to allow their national banks to engage in further borrowing, and they also use the approach to convince the members of the International Monetary Fund that the money lent by these countries should be repaid in a lump sum. Because all nations involved will benefit from the decisions made, this strategy often proves to be very effective.
There is another aspect to the new regulation, which should make the people who are concerned about the current situation very happy: The doctrine that allows countries to openly and publicly decry other countries for illicit conduct while still permitting them to borrow from them in a financial situation that would be considered normal and fair by international standards is codenamed the disciplines of diplomacy and impartiality. This aspect of the new rules basically allows a country to publicly attack an odious debt and yet still receive financing from creditors. No more may be said about an example like the German Federal Bank’s decision to publicly chastise France for not being able to effectively curb its excessive deficits.
In the past, the European Union and the United States did not publicly criticize one another whenever there was a European country that was performing badly and needed to be chastised for its actions. There was nothing wrong with Germany publicly chastising France for failing to properly curb its deficits, and yet the EU and the United States continued to provide financial assistance to the French government and to its banks. Had the U.S. and EU nations not publicly chastise each other, they might have been unable to keep up their support for the French government and banks. At the present time, it is highly unlikely that any new guidelines for publicly attacking or publicly chastising a country will be issued.
In fact, attacking a country publicly in the international community could create more problems than it creates. For example, if the United States or the European Union decided that Spain needs to publicly chastise Greece for its excessive debt levels, the Spanish government could immediately begin negotiations with Germany over a refinancing program that would essentially allow the Spanish government to borrow more money at a lower interest rate than it currently pays. A default on debt by the Greek government would certainly make matters much worse for Germany and the rest of the European Union, as it would force them to seek deeper cuts to their own budgets. If this happens, it is highly possible that the European Union could suffer a loss of even more members, perhaps up to three or four.