Last week, the global Jubilee movement met in Prague to move forward our agenda to address the root causes of poverty within the current international financial architecture. Jubilee’s Director, Eric LeCompte spoke to the international audience of leading civil society groups and academics in the field of development finance on the need for a sovereign debt workout mechanism and the harmful behavior of vulture funds.
Many poor countries struggle under crushing debt burdens, risking default or paying debts at the expense of critical domestic needs. Now that the international debt crisis has spread from the global south to northern economies, an orderly, fair and transparent way to deal with sovereign debt crises is critically needed hence a sovereign debt workout mechanism.
Additionally, the mechanism is needed to address the problem of ‘vulture’ litigation. Vulture hedge funds target nations in financial distress and buy up the nation’s debt for pennies on the dollar and then sue for the full amount – sometimes making up to a 400% profit off of the backs of the poor and financially distressed. Vulture funds have hampered debt relief initiatives as they wait to litigate until the nation has received life-saving debt relief in order to collect.
With the rise of vulture litigation and with the spread of international debt crises, a sovereign debt workout mechanism is urgently needed.