The news that Israel had been accepted into the Paris Club of creditor nations was welcomed by Israeli policy makers, who are facing calls to reduce high levels of poverty and inequality even as the country’s economy hums along.
The Paris Club announced Israel’s induction, bringing the club’s membership to 20 countries. The club is an informal group of governments, including the United States, that collectively negotiates deals with poor countries struggling with huge debts. It was created in 1956 and has worked out loan deals for 90 countries.
It can cancel or restructure debts when countries are at risk of default. Argentina agreed in May with the Paris Club on a plan to resolve $9.7 billion in debts that have gone unpaid since its economic collapse in 2001-2002.
Finance Minister Yair Lapid lauded the Paris Club announcement, saying it “shows Israel’s economic might and presents additional proof that Israel’s place is alongside the strongest countries.”
Once a tiny farming nation, Israel has evolved into a high-tech economy with numerous start-ups and companies in communications, software and military technology. Its economy continues to grow, and unemployment is roughly 6 percent, well ahead of the double-digit levels seen in many parts of Europe.
After a 16-year effort, Israel was accepted into the Organization for Economic Cooperation and Development, a policy forum for the world’s most developed economies, in 2010.
Israel “is cutting-edge by every stretch of the imagination, and fortunately for us, this part is leading the country,” said economist Dan Ben-David, executive director of the Taub Center for Social Policy Studies, an independent Jerusalem think tank.
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.