By David R. Francis

Ever heard of "unhappy birthday" cards? Thousands of them will be given to officials from the International Monetary Fund (IMF) and World Bank next Wednesday in Washington by representatives of Jubilee USA Network and other nongovernmental organizations.

It's a publicity stunt, of course. They want the two institutions and other key creditors to cancel debts owed them by the world's poorest countries. Their slogan: "It's no time for a party! It's time to drop the debt!" The IMF and World Bank, which mark their 60th anniversary in July, are struggling with that issue and the largest default on national debt in history.

How they and other creditors manage that $90 billion Argentine debt crisis could set a precedent for negotiations with other nations sinking in a sea of red ink. If Argentina actually defaults, rich-country banks and other financial institutions could balk at making loans to developing nations. In some cases, that could hurt their growth.

Nations have struggled with debt for centuries. French kings resolved some debts by chopping off the heads of their creditors (but that's hardly feasible when they're in another nation). In the 1800s, Spain defaulted seven times on its foreign debts, Germany and Austria five times.

Argentina, a middle-income nation, has defaulted four times on its external debt over the past 175 years, Venezuela nine times, Brazil seven times, and Mexico eight times.

Curiously, banks and other creditors never seem to learn their lesson. Sometimes, high interest rates and a portfolio of country loans still provide a profit. So, after a lag, they're again pushing money at nations that have defaulted.

The US occupation of Iraq has brought new focus on that country's debt. Though Iraq has huge oil reserves, it also has huge problems. The lack of security and its unsettled political future has kept foreign investors away. The value of Iraqi bonds has not been rising.

James Baker III, former US secretary of State, visited with key creditor nations last fall and winter to seek an above-normal debt reduction. So far, no firm numbers have been set.

"Its creditors will never get repaid in full," says Kenneth Rogoff, a former IMF economist now at Harvard University in Cambridge, Mass.

Lex Rieffel, a debt expert at Brookings Institution, suspects creditors will take a "haircut" - a reduction in the value of Iraqi debts - of between 70 and 90 percent. But nothing will happen until after the formation of an Iraqi governing council and the appointment later of someone with negotiating authority.

If Iraq is problematic, Argentina represents a hornet's nest. Two years ago, it set off the largest sovereign nation default in history by ceasing payments on its privately held foreign debts. Last September, it defaulted on another $3 billion owed to the IMF - the single biggest default in IMF history.

Subsequently, the IMF has loaned new money to Argentina to enable it to roll over its IMF debts while it talks with 21 private creditor groups. But Argentina's president, Néstor Kirchner, has boosted his popularity by making an extremely tough proposition to his nation's creditors, and insisting there will be no bargaining.

After considering interest on the debt, creditors would get about 10 to 12 cents on the dollar. That compares with about 70 cents on so-called "Brady bonds" - bonds that replaced some sovereign debts at the end of the 1980s after a debt crisis lasting years.

"We are at a crossroads," says Ted Truman, an economist at the Institute for International Economics. If Argentina gets a bargain, other debtor nations - perhaps Uruguay and Brazil - will want to follow that pattern.

That suits economist Mark Weisbrot fine. He notes Argentina has suffered a deep depression, and says lenders should not be bailed out.

But it is a tough balancing act between financial justice for creditors and mercy for debtors. As with settling the debts of bankrupt individuals and companies, the resolution of the debts of "bankrupt" nations tends to be a long, messy process.