It’s a deceptively simple way of dealing with a crushing sovereign debt: Declare the loans illegal, or “odious.”
The doctrine of odious debt was first proposed in 1927 by an obscure legal scholar named Alexander Sack, but did not gain currency until the late 1990s when poverty activists started applying the term to third-world debts. The argument is that when a lender knowingly gives money to a corrupt or dictatorial regime for purposes that don’t benefit the country, the debt should be erased when the tyrant falls.
Iraq invoked the term to shrug off the debts of Saddam Hussein; Ecuador used similar logic when it defaulted on some foreign creditors in 2008.
Now the term has spread to Europe, finding its way into speeches by politicians –both left- and right-wing – as they face rising frustration from voters about the belt-tightening required to keep their countries out of bankruptcy.
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