Taking Lead, Italy to Forgive Billions in Third World Loans

Breaking ranks with its wealthy peers, Italy pledged Friday to forgive $4 billion to $6 billion in debt owed by 62 impoverished countries over the next three years under easier terms than those set by other leading industrial democracies.

The initiative, approved by Parliament without dissent, was meant to strengthen Italy’s proposal at a summit next week for a similar write-off by its rich European neighbors, plus Japan, Canada and the United States.

Debt relief is the goal of a growing worldwide movement that includes Pope John Paul II, U.N. Secretary-General Kofi Annan and an array of star entertainers. President Clinton and other leaders endorsed the idea at their summit a year ago but it has been slow to take effect.

Under the plan, 41 heavily indebted Third World countries designated by the World Bank and International Monetary Fund are eligible for about $100 billion in debt relief. To qualify, they must adopt free-market reforms prescribed by those agencies, such as privatizing state property and maximizing exports of marketable commodities.

Annan complained in a letter this week that just five debtor countries in Africa and South America had qualified for relief and that the reduction of their financial obligations, an average of 35% each, was not enough to pull them out of poverty. He called for “urgent action” to ease the conditions.

Italy became the first of the group to support him with action. Instead of insisting on free-market reforms, the new Italian law offers debt relief to poor countries that agree only to respect civil liberties, renounce war as a means of resolving conflict, and use their freed-up resources on health, education and reducing poverty.

“This is a seismic shift,” said Jamie Drummond, spokesman in London for Jubilee 2000, a worldwide debt relief advocacy group that includes labor unions, religious groups and economists. Until now, he said, international debt relief policy “was made by a cartel, and now the Italians are breaking the cartel.”

While Britain has been calling for a similar change of conditions, Drummond added, Italy’s “is the first piece of [debt relief] legislation by a major creditor that makes humanitarian considerations paramount.”

Italy will write off all development and commercial debt owed it by 34 countries on the IMF and World Bank list and about two-thirds of the debts owed by 28 other poor Third World nations, the Foreign Ministry said.

By obliging Italy to write off at least $4 billion in debt by mid-2003, the law appears to accelerate a process that until now has been moving at a snail’s pace.

A Foreign Ministry statement Friday called the government-sponsored law, passed late Thursday, “an essential contribution to a broader strategy in the struggle against poverty, in which the international community should assume a heavier burden.”

Prime Minister Giuliano Amato will take that message to the summit in Okinawa, Japan, hoping to sway the United States, Britain and Germany, whose leaders have been particularly eager to show leadership on the issue, Italian officials said.

Amato’s predecessor, Massimo D’Alema, began pushing the initiative in January after opera singer Luciano Pavarotti and rock star Jovanotti used Italy’s biggest music festival to popularize the debt relief cause. On stage in San Remo before 17 million TV viewers, Jovanotti chanted in rap cadence: “Cancel the debt! One billion people on the planet live on less than a dollar a day.”

Parliament also was influenced by the pope’s calls for debt relief during this Roman Catholic Holy Year, which is dedicated to forgiveness and redemption. And the center-left government is seeking reengagement in the world after a sharp decline in foreign assistance during the 1990s.

The law includes as much as $2 billion in aid that will be combined with partial debt relief to some countries.

“This is one of the only foreign policy issues that united our Parliament this year,” Sen. Tana de Zulueta said. Debt relief terms being offered, she said, “proved so restrictive that most countries were unable to benefit. We were failing in our intent to allow the development of those countries.”