AN old dictum of finance states that if you owe the bank a small amount, then you worry, but if you owe the bank a large sum, the bank worries. A large debtor has leverage with the bank and can negotiate for concessions, restructuring or new loans. But a small debtor has no influence because of the asymmetry of power between the bank and the debtor.

Big and small debtors receive very different treatment. This is pellucidly illustrated by the difference in treatment meted out to Greece and Grenada.

The debt accumulated by Greece by decades of fiscal profligacy was sufficiently large to worry European banks and governments of the member states of the European Union (EU). The EU organised several large financial bailouts and finally a US$1-trillion package of debt relief so that Greek bonds could be devalued by 50 per cent.

This unprecedented action was prompted by the fact that Greece's inevitable and impending default would have triggered such a financial crisis that it would cause the collapse of the euro and the fragmentation of the European Union. Greece, in other words, was "too big to fail".

The Greeks knew that their debt threatened the EU and hence they played this by simultaneously resisting fiscal adjustment and initiating and encouraging mass protest demonstrations in the streets. The fear that galvanised Germany and France to convince the rest of the EU was the fear that default by Greece would be the first domino leading to subsequent defaults by Ireland, Portugal, Spain and Italy.

This treatment of a bankrupt Greece contrasts sharply with that meted out to Grenada, a small island developing state of no strategic importance to anyone, including Caricom, and whose debt is so small that it only worries the Grenadians.

Grenada is being subjected to a debt collection campaign by Taiwan to recover US$28 million provided to the Government of Grenada. The Government of Taiwan is attempting to collect foreign exchange revenue due to Grenada from airlines, cruise ships and other foreign companies doing business with Grenada. Next Taiwan will move to attack foreign assets owned by the Government of Grenada. As unpleasant as these actions are, the fact is Taiwan is entitled to collect from Grenada in the same way that any lender is entitled to collect from any bad debtor.

Grenada has put itself in this vulnerable position because it has not serviced its debt to Taiwan. Grenada is subjected to pressure from Taiwan because creditors take advantage of small countries and proffer the specious justification that creditors cannot allow a very small debtor to get away with not paying, because it sets a precedent for others, some of whom may be large enough to matter.

There is an international double standard in the treatment of countries. The rich take advantage of the poor, the developed take advantage of the developing and the big take advantage of the small. This is the law of the international "jungle". This is one of the reasons that international/multilateral organisations were developed, but they are dominated by the rich, developed and big countries.

These institutions are emasculated in trying to protect the poor, developing and the small. The United Nations could not stop the bombing of Libya and the International Monetary Fund cannot impose conditions of Greece or Italy, but can mercilessly demand draconian austerity measures on Grenada or Jamaica.

  2 comments

  5 comments

  4 comments

  0 comments

  3 comments

  7 comments

  0 comments

  0 comments

  10 comments

  0 comments

  0 comments

  2 comments

  3 comments

  1 comments

  2 comments

  9 comments

  3 comments

  3 comments

  0 comments

  7 comments