Lebanon en route to an illegitimate debt

29 August 2006 by Eric Toussaint , Damien Millet

Lebanon has just lived through a month of murderous conflict. More than 1,100 people have been killed during Israeli army raids and its blind strikes. A third of them are children under 12. Approximately a million people have fled. The human suffering which has been inflicted is unspeakable.

The trigger was the kidnapping of two Israeli soldiers by Hezbollah, a militia present in South Lebanon. But the response of Tsahal, the Israeli army, was unprecedented. Undoubtedly, here Tsahal is a weapon of massive destruction, with US support.

The cease fire now in place, while fragile, means the limited sphere of the present can be left behind and we can start to look a little towards the future. Whether or not it is respected, eventually Lebanon will have to be rebuilt. Damage is currently estimated at $2.5 billion where approximately 150 bridges have been destroyed and a black tidal pool caused by dumping 15,000 tonnes of oil into the sea (more than the catastrophe caused by Erika along the French coast in 1999) has already polluted 140 kilometres of coastline.

According to World Bank World Bank
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.

statistics, well before this war, Lebanon was crumbling under a colossal external debt: $22.2 billion at the end of 2004 for 3.5 million inhabitants. This represented more than $6,260 per inhabitant, without counting the internal debt which is just as large, making Lebanon one of the most indebted countries in the world per inhabitant. In 2004, Lebanon paid out $4.4 billion to service its external debt.

Since before this war, Lebanon was in a very difficult financial situation. Its creditors (headed by Saudi Arabia and France) met in November 2002 in Paris to find a solution: at the time, they had promised $4.3 billion in exchange for modernising the fiscal system and boosting privatisation. The debt therefore led to a reinforcement of neoliberal policies, so favourable to wealthy Lebanese, foreign creditors and their large corporations.

Now, Lebanon will again call upon foreign capital to rebuild. This implies another increase in its debt and in new economic measures of 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/
which accompany it. Therefore, the Lebanese people are going to have to pay very dearly, in the years to come, for consequences of this war inflicted by Israel in violation of international treaties governing relations between states.

The Lebanese people paid a first time by giving their lives, losing their loved ones, enduring the destruction of their homes, their property and infrastructure. They must not pay a second time by being bled dry to finance reconstruction. Palestine is already suffering from Israeli state terrorism where the cost, both human and financial, is enormous. Since March 2003 Iraq has already been subjected to an illegitimate military aggression on the part of the US and its allies, which dominate the country, impose neoliberal choices on its economy and make it indebted for the benefit of large multinational corporations from the countries in the North. Palestine, Iraq and Lebanon must demand accountability from their aggressors. Social movements must pressure the international community to move in this direction.

For Lebanon, a possible solution resides in the immediate cancellation of its debt and the establishment of funds for its reconstruction, which would be fed FED
Federal Reserve
Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/
by reparations deposited by Israel. A contribution from the US, who supports and finances the Israeli state, must be included. It is only then that it will be possible to say that the Lebanese people will have received justice.

Translation : Gillian Sloane-Seale et Carol Bonvin, C%rditrad.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.

Other articles in English by Eric Toussaint (499)

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Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).

Other articles in English by Damien Millet (46)

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