Committee for the Abolition of Illegitimate Debt

The coronavirus pandemic is a serious public health problem and the human suffering caused by the spread of this virus will be enormous. If it massively affects countries of the Global South with very fragile public health systems that have been undermined by 40 years of neo-liberal policies, the death toll will be very high. We must not forget the critical situation of the Iranian population, victim of the blockade imposed by Washington, a blockade that includes medicines and medical equipment.

Under the pretext of necessary fiscal austerity to repay public debt, governments and major multilateral institutions such as the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org and regional banks such as the African Development Bank have everywhere enforced policies that have deteriorated public health systems: job cuts in the health sector, precarious employment contracts, reduction of hospital beds, closure of local health centres, increase of health care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. costs and of prices of medicines, under-investment in infrastructure and equipment, privatization of various health sectors, under-investment by the public sector in research and development of treatments for the benefit of the interests of large private pharmaceutical groups...

This is true in Africa, Asia, Latin America and the Caribbean and in the countries of the former Eastern bloc (Russia and other former republics of the former USSR, Central and Eastern Europe). Nevertheless, this obviously also concerns developed economies.

It is very urgent to suspend the payment of the debt and to use the sums thus released to meet the needs of the populations and to protect them.

It must be stressed that the effects of the economic and health crisis will be particularly noticeable in the countries of the global South. Not only are these countries in a weakened position to cope with the epidemic and its economic consequences, but also the fall in the prices of raw materials will multiply the cost of borrowing for these countries. In addition, private financial companies in the North are withdrawing the purely financial investments they had made in the Global South (especially in the stock markets), thus causing a significant repatriation of capital to the North.

In the following document, we analyze the impact of European financial policies on the peoples of the South and make a series of proposals in this regard. 

Since 1980, the countries of the South [1] have repaid 18 times what they owed in 1980, but at the same time their debt level has increased more than 12-fold. Between 2000 and 2018, the public external debt of the countries of the South more than doubled from US$1,300 billion to nearly US$3 trillion [2]. A new debt crisis has already begun in about ten countries according to IMF data.

However, and contrary to the generally accepted idea that countries of the North aid countries of the South, an analysis of all North-South financial flows shows that for every 1 euro sent from countries of the North to countries of the South (via foreign direct investment - FDI, official development assistance ODA
Official Development Assistance Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs. - ODA, portfolio investment, private aid, other official flows), 3 euros go the other way (debt servicing, profits repatriated by investors, capital flight, ill-gotten assets, other illicit financial flows). This is a real “debt system”, which keeps the countries of the South dependent on the so-called developed countries.

The system begins with bilateral debts. Despite a strong lack of transparency in these accounts, as far as bilateral claims are concerned, according to World Bank data, the public external debt of the countries of the South amounts to nearly US$3 trillion. The bilateral share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of this debt is estimated at US$437.9 billion, i.e. almost 15%.

Beyond bilateral debts, EU countries can also exert influence on countries of the South through the European Investment Bank. The credits granted by the EIB are marked by characteristics that are contrary to the interests of the people: lack of transparency leading to corruption, embezzlement and over-invoicing, aid tied to European companies in order to favour the profits of their major shareholders, failing environmental standards, promotion of economic spin-offs to the detriment of the fight against poverty.

At the European level, it should be stressed that monetary policy is not without consequences for the peoples of the South. In response to the outbreak of the 2007-2008 financial crisis, the European Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx (ECB ECB
European Central Bank The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html ) implemented a policy of quantitative easing (QE). Beyond the highly questionable effects of this policy in Europe, QE caused a massive influx of capital from EU countries to countries of the South. In search of profitable investments, large amounts of cash were poured into these countries. European investors rushed into bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. issues from Southern countries because they were more remunerative than bonds issued by Northern governments. These bonds are obviously riskier. Moreover, large purchases of bonds from the South lead to a sharp increase in the debt of the countries that issue them, taking them to unsustainable levels. As a new debt crisis spreads, these highly speculative and volatile financial flows contribute more to destabilizing the economies of these countries than to strengthening them.

Neo-liberal policies (SAPs from the 1980s onwards) increased the number of poor people in countries of the South. The global financial institutions, led by the World Bank, are promoting “financial inclusion” to accelerate the integration of this population into the market economy.

For hundreds of millions of extremely poor people, “financial inclusion” actually means that they will become easy prey for lenders, whether through microcredit agencies or traditional loan sharks. Neo-liberal attacks on public services (schools, hospitals) and the precariousness of those in paid employment further accentuate monetary needs, especially for single-parent women. Capitalist microcredit institutions, sponsored by major international institutions such as the World Bank and the European Investment Bank (EIB), are multiplying, under the guise of fighting poverty, and are making large profits on the back of the poorest sectors of the population by imposing abusive conditions and usurious rates. Microcredit agencies, which include subsidiaries of large private banks such as BNP Paribas and Santander, claim to have almost 100 million clients worldwide, almost 80% of whom are women. Despite the media campaign in its favor, the record of microcredit over the last thirty years is clearly quite negative.

The solutions to be found in terms of the fight against poverty do not consist in indebting the poor via the market but in significantly increasing their income by guaranteeing them sufficiently high prices for their products (farming and fishing / agricultural and fisheries/ products in particular), decent wages, stable jobs, access to free public services in education and health, access to credit via public bodies or cooperatives lending at zero or very low rates.

The fight against abusive microcredit must be linked with the great battle against public debt.

On the other hand, we must not forget the so-called Official Development Assistance, which generally serves to maintain relations of domination between countries. Aid that is “conditioned” by the application of neo-liberal policies:- such as, to give but a few examples, cuts in public spending that degrade the quality of health and education services, falling employment in the civil service, reduced public aid to small local producers, making workers more precarious; privatization, controlling border and migration to strengthen Fortress Europe. All these conditions are defined by the major governments of the North and the World Bank/IMF couple. This aid is granted through three channels: multilateral aid, bilateral aid and NGOs . In addition, a number of expenditures counted as ODA are completely questionable or downright odious because they never reach the populations that are supposed to benefit from them: they are used, for example, for the detention of asylum seekers or other restrictive migration policies applied on the territory of EU countries. Some of the sums included in ODA are the result of a pure play on words. For example, bad debts are written off and accounted for as if they were a donation, while no funds are actually granted to the country concerned.

As in Northern countries, one of the preferred means of fostering private sector involvement is the promotion of public-private partnerships (PPPs). Formerly financed by governments, the financing and realization of infrastructure, goods and services are then entrusted to the private sector... Public authorities are becoming more and more indebted to the private sector. Large private public works companies become owners of new infrastructure and then lease it to the public authorities. These public-private partnerships (PPPs) are characterized by a lack of transparency in tendering and accounting, over-invoicing by private companies, non-compliance with the standards in force, lack of public consultation and benefits for the population, rental contracts lasting several decades at the expense of public authorities, and so on. PPPs must be rejected!

Finally, we must not forget that European States are part of international institutions that go beyond the European framework: the International Monetary Fund (IMF) and the World Bank (WB), and even the African Development Bank for some European States, especially former colonial metropolises. This is also the case for the Asian Development Bank, the Asian Investment Bank for Infrastructure (AIIB) and the Inter-American Development Bank (IDB). The European states bear a heavy responsibility for the harmful policies they pursue.

Considering 1. the anti-democratic character of these institutions, 2. the flagrant contradictions between the IMF’s structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ plans and several international human rights treaties, 3. the responsibility of these institutions for the outbreak of the Third World debt crisis in 1980, 4. the past and present financing of despotic or dictatorial regimes by the IMF and World Bank,
the debts claimed by the World Bank and IMF from the countries of the South must be recognized as illegitimate and/or odious. Despite the hegemony of the United States in these two institutions since their creation, by virtue of the voting rights of EU countries (or groups of countries presided over by an EU country) [3], the latter also have a clear responsibility for the level of indebtedness of the countries of the South [4] and for the negative consequences of the policies pursued there.

In conclusion, European governments (accomplices of large European private companies), both historically and because of their political, economic, military or financial weight on the world stage, have a huge responsibility for the injustices suffered by the peoples of the South both bilaterally (“old” empires, the transition from colonialism to neo-colonialism, specific free trade agreements, interloping networks - Françafrique -, etc.) and through their own actions.), as well as multilaterally (continental free trade agreements - Eurafrique -, regulations on fiscal issues, EU countries’ membership and voting rights in international financial institutions - World Bank - WB, International Monetary Fund - IMF, European Investment Bank - EIB, World Trade Organisation WTO
World Trade Organisation The WTO, founded on 1^st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

- WTO, Group of 7/20 (G7/20), Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, OECD OECD
Organisation for Economic Co-operation and Development OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.

http://www.oecd.org/about/membersandpartners/ , etc.). -, representations to the UN Security Council, etc.).

Recommendations

In order to cancel the illegitimate and odious debts claimed from third countries and thus promote sovereign, solidarity-based and self-centred forms of development of the countries of the South, the governments of European countries should, without any form of interference, undertake to :

• Strictly respect the primacy of human rights over all other rights.

• Oppose the systematic promotion of the private sector to finance the development of countries of the South, and in particular oppose the promotion of Public/Private Partnerships (PPPs).

• Cancel their support for the abusive microcredit system and its institutions, favouring their replacement by genuine cooperatives managed by local populations and by a public credit service granting loans at zero or very low interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…
  
  The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. .

• Put an end to neo-liberal policies and the privatization of public services.

• Repeal a series of international, multilateral and/or bilateral treaties (economic, commercial, political, military, etc.) that are contrary to the exercise of the full sovereignty of the States of the South and to the interests of the peoples of the South and, more broadly, to the general interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. of humanity.

• Leave the international institutions and other informal groups that in essence feed North/South asymmetries, including the IMF, the World Bank, the WTO, the Paris Club, the G7 and the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). .

• Leave regional development banks outside their borders, including the African Development Bank, the Asian Development Bank, the Inter-American Development Bank.

• Join other countries of the South to create alternative multilateral international institutions that are democratic (on the principle of one country = one vote), equitable and under popular control. This means contributing to the creation of new international institutions that respect human rights and nature and to the in-depth reform of the United Nations Organization, in particular by putting an end to the right of veto in the Security Council. The in-depth reform must also concern certain specialized UN agencies that have become captive to the “partnership” with private foundations that promote PPPs, microcredit, the market at large, free trade,...

• Support the implementation of citizen audits on their territory in order to cancel debts claimed from third countries that have been identified as illegal, unsustainable, illegitimate and/or odious.

• Launch a vast audit program with citizen participation to highlight all forms of spoliation and exploitation of the peoples of the South.

• Impose heavy fines on companies that have plundered the peoples of the South in various forms in order to contribute financially to a special aid and compensation fund;

• Finance the countries of the South, excluding official development assistance, by means of zero-interest loans, repayable in whole or in part in the currency desired by the debtor.

• Make available to the populations of the countries of the South through their associations/autonomous organizations, all documents, including those classified as “defence secret”, that can shed light on the origin of the debts claimed by various creditors.

• Regularly make public all claims against third parties in an easily accessible and comprehensible form.

• Expropriate “ill-gotten goods” by the rulers and ruling classes of the South and return them to the populations concerned and under their control.

• Put an end to official development assistance in its current form as it is essentially an instrument of domination for the almost exclusive benefit of the countries of the North and to replace it with an unconditional “Contribution of reparation and solidarity” in the form of grants, excluding in its calculation debt cancellations and amounts that do not serve the interests of the populations of the South. This contribution must correspond to at least 1% of the gross national income of the most industrialized countries.

• Issue an official public apology for all the wrongdoings committed by European powers towards the populations of the South, entitling them to reparations.

• Affirm the right to reparations and/or compensation to peoples who were victims of colonial plunder and spoliation through the debt mechanism.

• Acknowledge the ecological debt of industrialized countries to the countries of the South and make reparations and/or compensation by recovering the cost of these expenses through a tax or fines levied on the large companies responsible for pollution.

• Prohibit companies from speculating on the resources and production of the countries of the South.

• Heavily punish companies guilty of any form of corruption by public officials of the countries of the South.

• Sanction senior officials and political personnel who in European countries have favored or are favoring the spoliation in various forms of the peoples of the South.

• Heavily sanction banks (including withdrawal of banking licences) that launder dirty money and are complicit in tax evasion, capital flight, and spoliation of the populations of the South.

Translated by Pierre-François Grenson and Christine Pagnoulle.