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1) Breaking with creditors’ power: the importance of the Greek debt audit While the world's media focuses on the bailout negotiations, a debt audit is underway to prove much of Greece's debt illegitimate, illegal and odious by Fanny Malinen Red Pepper, Britain, June 2015 <http://www.redpepper.org.uk/breaking-with-creditors-power-the-importance-of-the-greek-debt-audit> The world’s eyes are once more on Greece. I had the opportunity to visit Athens in mid-May, joining a knowledge exchange organised by the Political Economy Research Centre at Goldsmiths, University of London. The Greek government had just days before paid their international creditors with money from pension funds and other public organisations. There seemed little reason for optimism that the government would not give in to the pressure and accept the austerity that would come with the next debt payments. I was told the city was far less militarised than during the previous government, even though there is still a riot police bus near every square. I could feel a whiff of expectations in the air of the city. People seemed to like the governing party Syriza mostly because they were not the previous government. Yet the government was not at that point standing strong against the creditors that own 80 per cent of Greece’s debt: the European Commission, European Central Bank and IMF. What has changed in the last few weeks? Can't pay or shouldn't pay? Of course, there are many factors. It has long been clear to economists – and most people who are not high-ranking EU officials – that it is impossible for Greece to pay its debts in full. But 'can’t pay' is different from 'shouldn’t pay'. The argument is gaining traction that the loans to Greece never benefited the people and should therefore be written off. In April the speaker of the Hellenic Parliament, Zoe Konstantopoulou, launched a Truth Committee on Public Debt. The committee consists partly of international experts, many of whom also participated in the similar process that led to Ecuador defaulting on billions of dollars’ worth of loans to international creditors in 2008. Many of the Greek participants are not affiliated with Syriza. Giorgios Mitralis, a member of CADTM (Committee for the Abolition of Third World Debt) Greece, told us that, surprisingly many are officials who had worked for the previous government. There are also grassroots activists who have been campaigning for a citizens’ debt audit since 2011 – a reminder that Greece’s rejection of austerity has grown out of years of hard work by social movements. [see <cadtm.org>] The Debt Truth Committee published its first findings this week. 'Greece not only does not have the ability to pay this debt, but also should not pay this debt, first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece,' it states. 'Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.' The European Central Bank over-stepped its mandate by imposing political conditions on its loans. Other EU countries’ bilateral loans did not benefit the Greek people but instead European financial institutions. The IMF knew that the conditions attached to their loans were undemocratic and in breach of human rights Greece is obliged to respect under domestic and international law. These are some examples of the illegal, illegitimate and odious nature of the Greek debt. It is difficult to over-estimate the importance of the debt audit: as Syriza’s months in office have shown, it is impossible to reject austerity when a country’s sovereignty is compromised by the power of its creditors. Many countries in the global South have known this for decades. Creditors go to great lengths of effort to keep debtor countries on their knees enough to adhere to neoliberal policies, but this is a careful balancing act not to push them into default. That could break them free from their submissive position. Because of the imbalance of power, it does not matter that the rules of financial capitalism that dictate the situation – although presented as some law of science – are totally arbitrary. A debt audit exposes this power. It reclaims default from a creditor-imposed disaster into a legitimate option to deal with illegal or illegitimate loans. As we can see in Greece, it broadens the discussion from how to pay onto whether to pay. The findings of the Truth Committee are not binding: they are only 'a very strong argument not to pay', as Giorgos Mitralis, who initiated the international appeal in support of the committee, told us in Athens. Greece is upfront that it cannot pay the debt. Pressure from the grassroots and international solidarity is still needed to ensure Greece rejects its creditors’ grip and says 'we won’t pay' – not because their debts are impossible, but because they are immoral. _ _ _ _ _ _ _ _ _ _ _ Fanny Malinen is a London-based freelance journalist and member of Debt Resistance UK 2.a) Audit Committee: Greece’s Debt ‘Illegal, Illegitimate and Odious’ by A. Makris The Greek Reporter, June 17 <http://greece.greekreporter.com/2015/06/17/audit-committee-greeces-debt-illegal-illegitimate-and-odious The debt imposed on Greece and its residents by creditors directly infringes the human rights of Greeks and is “illegal, illegitimate and odious,” according to the preliminary report issued on Wednesday by the Audit Committee on Public Debt. The Greek Parliament earlier released a six-page summary of the Committee’s preliminary findings during hearings conducted since April, when it was convened by Parliament President Zoe Konstantopoulou. The summary stressed that the entire adjustment program imposed on Greece “was and remains a politically orientated program,” while challenged arguments that the policies imposed on Greece aimed to improve its capacity to pay back the debt. It concluded that Greece was the victim of a “premeditated and organized” attack and of a “violent, illegal, and immoral mission” to shift private debt onto the public sector. “All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement of the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate and odious,” the report said. Among others, the report noted that the unsustainability of Greece’s debt was evident to all involved from the outset, yet Greek authorities and other European governments, with the assistance of the media, had “conspired against the restructuring of public debt in 2010 in order to protect financial institutions.” (source: ana-mpa) 2.b) Syriza MPs call for parliamentary debate on Debt Committee report International Viewpoint, June 23 <http://www.internationalviewpoint.org/spip.php?article4095> Request for the opening of a debate in plenary session of the Greek Parliament in connection with the results of work of the Truth Committee on the Public Debt. This request was presented by 49 Syriza MPs in the 24 hours which followed the public session of the committee on 18 June 2015. The forty-nine Syriza MPs who signed the letter addressed to the Greek Parliament declare: “after the publication of the preliminary conclusions of the Truth Committee on the Public Debt of our country, according to which the greatest part of the debt is odious and illegitimate, our people cannot be held responsible for that, and moreover the debt is the result of the transformation of the crisis of the private banks into a crisis of the national debt into Greece, with the aim of saving the French and German banks”. “We suggest that the proposal is cosigned so that a debate in a plenary session is opened in order to have a discussion on the results of the Truth Committee on the Public Debt of our country and to strengthen the demand and the fight of the government and the Greek people for the cancellation on greatest part of the debt”, underlined the Syriza MPs in their conclusions. Signatories: Petrakos Thanasis, Thomas Kotsias, Samoilis Stefanos, Dimanche (Voula) Tectonidis, Eugenia Ouzounidou, Oursouzidis George, Costas Zacharias, Evangelia (Litsa) Ammanatidou, Evangelia Vagionakis, Merope Tzoufi, Vangelis Diamantopoulos, Despina Charalambidou, Stathis Leoutsakos, Kritsotakis Michael, Ilias Ioannidis, Elena Psarrou, Katerina Papanatsiou, Chrisoula Katsavrias - Sioropoulou, John Stathas, Kodela Dimitris, John Dedes, Limite Christos, Eleni Sotiriou, Maria Kanellopoulos, Athanasios Papadopoulos, Paul Pollakis, John Michelogiannakis, Psychogios George, Costas Lapavitsas, Marios Katsis, Peter Constantina, Froso Karasarlidou, Stathis Giannakidis, Rachel Makris, Skoumas Thanasis, Syrmalenios Nikos, Césium George, Socrate Famellos, Nektarios Santorin, Kamateros Elias, Hussein Zeybek, Foteini Vaki, Zisis Zannas, Kostas Delimitros, Chatzilamprou Claus, Bassins Alexandra, Natasha Gary, Kostas Barkas, Mission Karanastasi Translated from CADTM <cadtm.org> 2.c) Greek Debt Restructuring ‘Essential’ Economist Philippe Legrain Tells Parliament Debt Inquiry by A. Makris The Greek Reporter, June 12 <http://greece.greekreporter.com/2015/06/12/greek-debt-restructuring-essential-economist-philippe-legrain-tells-parliament-debt-inquiry> A restructuring of Greece’s debt is absolutely essential, otherwise the chances of a recovery for the country are extremely slim, political economist Philippe Legrain said, in a public hearing before the “Debt Truth” Committee in the Greek Parliament. A one-time advisor to former European Commission President Jose Manuel Barroso, Legrain said that the main reason why debt restructuring was not the solution chosen for Greece’s problem was a desire to avoid damages to French and German banks. He also slammed the economic program imposed on Greece as “barbaric,” saying it was based on “mistaken assumptions” and had led to inhumane conditions for Greeks. Supplying additional financing to pay off previous debt, coupled with additional austerity as a condition for this financing, benefited repayment but not the Greek people, he added. The economist said that at the start of the Greek crisis, the IMF had pushed for debt restructuring but this was resisted by Eurozone officials, particularly ECB President Jean-Claude Trichet, German Chancellor Angela Merkel and former French President Nicolas Sarkozy. Working with the former IMF Managing Director Dominique Strauss-Kahn, they decided to “pretend” that Greece had a liquidity problem rather than an inability to pay its debts. They agreed to lend Greece as a show of “solidarity” but essentially in order to save French and German banks, as well as other investors that would suffer significant losses on these debts, while the ECB had “bent” the rules to the maximum by buying up Greek bonds. According to Legrain, what happened was the bailout of Greece’s creditors, not the bailout of Greece, and this was proved by the flow of capital. He pointed out that nine in every 10 euros given to Greece was spent on paying off loans and not used within the country. The Debt Truth public hearings will continue on Monday with the testimony of Greece’s former IMF representative Panagiotis Roumeliotis, while the Committee’s preliminary conclusions will be announced on June 17-18. The Committee on the Truth About Public Debt was set up by Parliament President Zoi Konstantopoulou in order to conduct a detailed audit of the debt and examine its legitimacy and legality. 3) Why Europe Needs A Debt Conference by Ozlem Onaran Social Europe, June 24 <http://www.socialeurope.eu/2015/06/why-europe-needs-a-debt-conference> . . . According to the current proposals of the Greek government, even if there are elements of a left austerity with redistributive concerns, the primary budget surpluses imposed on them are too high to secure economic and social recovery; further privatizations are expected; the demands regarding minimum wages and collective bargaining are postponed, and the type of cuts in the pension system continues to be the sticking point. But even if a deal is reached, there are other inconvenient facts about the increase in the public debt in Greece since 2010. The Truth Committee on Public Debt – an independent committee of experts from 11 countries set up by the President of the Hellenic Parliament, Zoe Konstantopoulou – has published its preliminary report on 18 June 2015. The report provides evidence that the Greek debt is largely illegal, illegitimate, and odious. The programmes were based on clearly wrong assumptions; however this was not a mistake, their unsustainability was predictable and the main goal was the rescue of banks and private creditors. Particularly revealing is the testimony of Panagiotis Roumeliotis, the former representative of Greece at the IMF, on 15 June 2015 at a public hearing answering the questions of the Truth Committee. The IMF knew that the Greek debt was unsustainable and according to its own rules should not have agreed to a loan agreement without a debt restructuring in 2010, but the European governments and banks influenced the decision. Papandreou’s government helped to present the elements of a banking crisis as a sovereign debt crisis in 2009. In 2013 the IMF admits that “a delayed debt restructuring also provided a window for private creditors to reduce exposures and shift debt into official hands”. Since the first Memorandum in 2010, private creditors managed to offload their risky bonds issued by the Greek state. In 2015, 80% of Greece’s public debt is held by public creditors: fourteen Member States of the Eurozone, the EFSF, the IMF, and the ECB. Only less than 10% of the funds have been destined to the government’s current expenditure. The conditionalities imposed further neoliberal reforms, which was not only an aim in itself, but also helped to create the illusion that they were designed to secure the future debt repayment. However, the wage and pension cuts and fiscal consolidation led to lower GDP, tax losses, and higher public debt. Our estimates show that the fall in the wage share alone has led to a loss in GDP by 4.5%, and a 7.80% point increase in the public debt/GDP ratio. The fall in wages alone explains more than a quarter (27%) of the rise in the public debt/GDP ratio in this period. The conditionalities of the memoranda have not only been counterproductive in terms of its aims regarding debt sustainability, but also engineered a humanitarian crisis. Philippe Legrain, advisor to the President of the European Commission Barroso in 2010, who spoke at a public hearing at the Greek Parliament on 11 June 2015, writes: "Why would Eurozone authorities be so cruel and foolish? Because they don’t really care about the welfare of ordinary Greeks. They aren’t even that bothered about whether the Greek government pays back the money that they forced European taxpayers to lend to it, ostensibly out of solidarity, but actually to bail out French and German banks and investors. German Chancellor Angela Merkel and other Eurozone policymakers just don’t want to admit that they made a terrible mistake in 2010 and have lied about it since." The report of the Truth Committee demonstrates that the debt claimed today from Greece can be considered illegitimate, in the sense that it has not benefited the population but a small minority of private creditors, especially the large Greek, German and French banks. This debt is unsustainable not only from an economic, but also a human rights perspective, as Greece is currently unable to service its debt without seriously impairing its capacity to fulfill its basic human rights obligations regarding the right to work, a life with dignity, social security, health, education, and housing. Loans have been contracted in violation of the Greek Constitution and the EU law, and can therefore be classified as illegal. The debt may also be classified as odious, since lenders knew that the conditionalities attached to their loans violated fundamental human rights. The report also confronts the myth of excessive public spending before the crisis. The increase in debt since the 1980s was not due to excessive public spending, which in fact remained lower than the public spending of other Eurozone countries, apart from excessive and unjustified military spending, marked by widespread fraud with contracts benefiting the armament industry of the creditor countries. The other reasons of the rise in public debt were the extremely high interest rates, loss of tax revenues due to tax evasion and illicit capital outflows, and finally the recapitalization of private banks. On 21 June 49 SYRIZA MPs requested a plenary of the Parliament to discuss the report of the Truth Committee on Public Debt. Whether there is a deal or not, there will be people in Greece who will not forget these inconvenient facts and seek justice. Who owes whom after years of destruction? This concerns not just the people of Greece but also Europe. Europe needs a debt conference. In 1953, as a result of the London Debt Agreement, half of German debt was written-off. The winners of the financial crisis do not have interest in a debt conference, but the people of Europe have the right to learn that their taxes were used to bail out banks. The people in Ireland, Portugal, Spain, and Latvia need to see the truth that their governments imposed on them the similarly wrong austerity measures. The bill must eventually be sent to the private banks. Until then the people of Greece have the right to refuse to pay the debt. It is time that the Greek people have a clear discussion about what the debt means, and what are the options outside this straightjacket. Greece needs policies to achieve decent jobs with decent wages for both women and men, structural change, sustainable development and a caring society for both the young and the elderly. Solutions to these problems are incompatible with payment of the debt and austerity policies likely to be attached to further agreements. A unilateral debt default surely requires capital controls, but despite the scaremongering, the Greek people need to be reminded that most countries had capital controls until the massive financial deregulation of the late 1970s and 1980s. To counterbalance the blackmail of the ECB, the Greek government can introduce IOUs for internal payments. Will this lead to an exit from the Eurozone? Staying in or exiting the Euro cannot be a taboo, and exit is a possible outcome of confrontation, but it is not the only outcome. After default, the ECB would cut the supply of liquidity, since the government bonds held by the Greek banks would cease to serve as collateral, but according to Willem Buiter of Citi, European authorities could recapitalize the Greek banks, and the ECB could continue funding the banks until a political decision is reached to avoid being the institution to pull the plug. But this approach sees the transition period from the perspective of the bankers; from the perspective of the Greek government, the more important issue is to take control of their banks rather than leaving it to the ECB. The degree of financial contagion to the rest of Europe after a Greek default is yet to be seen, as the calm in the government bond markets seem to be more fragile than the ECB and the European governments hope for. But the political contagion of a Greek default, as people choose dignity over blackmail, is what the people of Europe can hope and prepare for. The political and financial contagion will mutually reinforce each other in the medium run as more questions are asked by the people of Europe about the legitimacy of the so called bail out programmes. _ _ _ _ _ _ _ _ _ Özlem Onaran is Professor of Workforce and Economic Development Policy at the University of Greenwich and and a member of the Truth Committee on Public Debt in Greece. She was previously senior lecturer in economics at Middlesex University. Until 2004 she was at Istanbul Technical University. Her published articles cover globalization, distribution, employment, investment, and financial crisis in Cambridge Journal of Economics, World Development, Applied Economics, International Review of Applied Economics, Eastern European Economics, Labour. She collaborates with Socialist Resistance, the British section of the Fourth International and Yeniyol (New Course), publication of the Turkish section of the FI. _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
