Australia takes control in Nauru

A change of government has given Nauru's creditors hope

Australian officials are arriving in Nauru in an attempt to rescue the tiny Pacific island from financial disaster.

At the head of the deputation is Peter Depta from the Australian Treasury, who will effectively take charge of Nauru's tattered state finances.

Mr Depta needs to identify reforms that will enable Nauru to pay off hundreds of millions of dollars of debts.

Nauru, once one of the richest places on the planet, has already lost control of most of its assets.

Its extensive empire of international property is currently in the hands of receivers.

Down and dirty

Australia's decision to take control in Nauru is the latest stage in the island's slow financial decline.

During the 1970s and 1980s, Nauru's 10,000 inhabitants enjoyed the world's highest standard of living, thanks to exploitation of rich deposits of phosphates.

But the phosphates eventually ran out, and the billions of dollars of proceeds were invested unwisely.

The island's other source of income - offshore financial services - has also come under attack from international regulators.

The sharp decline in Nauru's fortunes has led to at times catastrophic social upheavals and an increasingly tense relationship with its many creditors.

Pulling together

The Australian Government hopes that the worst could be over.

Nauru's days of luxury are over

Canberra has been cheered by last month's ousting of President Rene Harris; his replacement, Ludwig Scotty, has promised long-delayed reforms.

The past few weeks have also clarified the legal situation around Nauru's last remaining overseas assets, principally a chain of properties in Australia.

After considerable wrangling, courts have allocated them to receivers, which will allow disposals to go ahead.

There has been no word, however, of progress towards a bail-out, announced in May by Indian business group Hiranandani .

In the meantime, Nauruan public-sector workers are not being paid, according to media reports.