Has Israel finally “made it” to the class of first world economic nations?
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The Paris Club of creditor nations has announced the admission of the State of Israel to the organization which helps small nations restructure their debts. Israel becomes the twentieth Paris Club creditor after an ad-hoc association with it of more than 30 years. It also took part in 31 negotiations alongside Paris Club creditors, from the Paris Club Agreed Minutes on 28 July 1983 with Ecuador to the Joint Declaration with the Argentine Republic on 29 May 2014.
The admission of Israel is a sign that the country has emerged as a world economic player because the poorer nations of the world look to its members for help with their financial and economic crises.
According to the Club, it has admitted Israel because the country recognizes that the Paris Club provides a multilateral framework that helps creditors recover their claims in arrears and allows for an efficient and timely resolution of debt crises, and continued financing for economic development, through coordinated creditor action that includes, but is not limited to debt workouts.
The organization is open to any official creditor that may express its willingness to cooperate with it if it demonstrates its commitment to share the Club’s principles and to foster an open and constructive dialogue between sovereign creditors.
The Paris Club’s unique experience and track record of 430 successful negotiations with 90 countries, along with its openness and flexibility allow it to continue playing a pivotal role in the international financial system as the world’s only organized forum to achieve coordination amongst official bilateral creditors in restructuring sovereign debt.
The organization can cancel or restructure the debts of countries are at risk of default. In May it did just that for Argentina, implementing a plan to aid that nation with its $9.7 billion in debts that have not been paid since it suffered an economic collapse in 2001.
Israel’s Finance Minister Yair Lapid said in a statement that this, “shows Israel’s economic might and presents additional proof that Israel’s place is alongside the strongest countries in the international arena.”
The move follows Israel’s inclusion in the Organization for Economic Cooperation and Development, a policy forum for the world’s most developed economies, in 2010.
But the country still suffers from widespread poverty with an estimated 20% of its citizens living below the poverty line.
The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilize and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment. They provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).
The origin of the Paris Club dates back to 1956 when Argentina agreed to meet its public creditors in Paris. Since then the debt treated in the framework of Paris Club agreements amounts to $ 573 billion.
Its current members are representatives of the governments of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, the Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.