Debt CrisisJuly 17th, 2012
The reports about the debt crisis are endless, and the arguments seem ideological. National debt here in the United States will be a major political issue in the presidential campaign. But the debt crisis in the European Union seems more destabilizing. Will the EU fall apart? Will countries choose to leave it? How will events in Europe impact the U.S. economy? What stand should a Catholic take?
These questions remind me my years in the Philippines. In the 1990’s the International Monetary Fund imposed severe conditions on the Philippines before it would lend anything further to the struggling government. One of the most odious conditions was that taxes had to be increased and that the Philippine government had to prioritize its payments due on international loans.
Budget cuts on social services—such as education, health and infrastructure—were an IMF demand. Taxes, inflation and devaluation of the Philippine Peso followed. The public outcry was huge. Protest rallies were frequent, massive and sometimes violent—similar to recent public demonstrations in Greece this year.
Catholic social teaching provides important principles such as the dignity of the human person, basic human rights and the principle that people and their common good must be the focus of economic activity, not simply profit.
Filipino church leaders, cleric, lay and religious, turned to John Paul II’s encyclical Centessimus Annus, published in 1991 to mark the 100th anniversary of Leo XIII’s Rerum Novarum. A key element was John Paul’s discussion of international debt:
The principle that debts must be paid is certainly just. However, it is not right to demand or expect payment when the effect would be the imposition of political choices leading to hunger and despair for entire peoples. It cannot be expected that the debts which have been contracted should be paid at the price of unbearable sacrifices. In such cases it is necessary to find—as is partly happening—ways to lighten, defer or even cancel the debt compatible with the fundamental right of peoples to subsistence and progress. #35
That same principle seems to be crucial today. There are some things more important than profit and the free market economics. Certainly, finding humane ways of handling the debt crisis is an ethical concern for every country today.
The Vatican’s permanent observer at the United Nations offices in Geneva, Archbishop Silvano Maria Tomasi, calls for ethical responsibility in the handling of foreign debts. The Vatican supports the removal of “conditions” for new loans imposed on debtor nations, by the IMF and the EU, as an important step in dealing with the debt crisis. Why? Because such conditions are usually in the interest of the lending nations and can be harmful to the people in debtor nations. The text of Tomasi’s remarks are found here.