The EU chooses to defend big capital and not majority interest: Serbia is not the only guinea pig

10 January 2018 by Eric Toussaint , Stefan Slavković

Éric Toussaint granted this interview to Stefan Slavković from the Serbian weekly NIN.

Eric Toussaint has been writing on international financial systems for a few decades now. He believes that everyone should be able to understand, comprehensively and effortlessly, how these systems work. However, he finds that it is not always easy to convince publishers to publish an author’s work if there is another request: free internet access to these books. Years of work has earned him the reputation of an author often read and quoted. This helps to find support for his research from citizens looking for viable alternatives. His new book in French (soon to appear in English), called Le Système Dette. Histoire des dettes souveraines et de leur répudiation (The Debt System: History of sovereign debts and their repudiation), was published by Les Liens qui Libèrent, at the end of 2017 in Paris, France. Bancocracy (2014) and Debt, the IMF and the World Bank: Sixty questions, sixty answers (2013) are some of his previously published work.

The Belgian historian with a Ph.D. in political sciences also stands out in many other ways: he grew up in a Belgian village with a population of 2,500 inhabitants from 30 different nationalities, he gave up an academic career in Liège for activism and research. In 1990, he was a founding member of the Committee for the Abolition of Illegitimate Debt, which was part of the process that launched the World Social Forum. At the invitation of the Centre for Emancipating Politics, Belgrade, he delivered a lecture at the Faculty of Philosophy titled “Why and how can European illegitimate debt be abolished”, pointing out that the debts created in the 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 a privileged minority instead of the public interest are illegitimate (see The governments of Ecuador (2007-2011), Paraguay (2008-2011), as well as the Parliament of Greece (2015) requested Toussaint’s advisory aid during their public debt audits. He has also participated in several citizen initiatives for European debt audits. We asked for his views on our economy, given that the public debt has tripled to 65% of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
since 2008, i.e. it has gone up from € 8 billion to € 24 billion.

Toussaint: “I would say that Serbia and the other Balkan countries, as well as Portugal, Spain and Cyprus, belong to the periphery; while France, Belgium, the Netherlands, Austria and especially Germany constitute the Centre, which treats the Periphery as a laboratory. The transfer of capital and technology from the Centre to the Periphery comes with political and financial conditions set by the European Commission (EC), 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.

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.
), 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.
and the European Investment Bank (EIB). On the other hand, financial flows from the periphery towards the Centre entail debt repayment and repatriation of profits made by foreign companies that exploit the Periphery’s “cheap” workforce. We must also mention the flight of capital and tax evasion orchestrated by capitalists in the periphery. Add to this the brain drain and the exodus of the general labour force from the Periphery towards the Centre. This denotes an irreplaceable wealth, the greatest wealth. We cannot buy new citizens.

Moreover, there was a massive financial flow from the Centre to the Periphery before the crisis, mainly via the German, Austrian, French, Belgian, Dutch and Italian banking sectors. Private and public debts increased and, after the crisis in the Centre since 2008, the financial influx stopped. Some peripheral countries are now finding it more difficult to repay the debt of households, companies or states. Before the banking crisis erupted in Germany and other countries in the Centre, getting money from the Centre was easy, it was almost a gift. You should know that the Centre’s bankers did so because of excess liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. and the desire to invest for profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . But such a period is always followed by a crisis. In fact, Serbia is not the only guinea pig. The same goes for Spain, Portugal, Cyprus, almost all the Balkan countries, Ireland... In short, the peripheral economies”.

Do you think that the EU is a lesser evil for Serbia?

I guess the EU is still attractive for Serbia. And I understand why, especially if we consider the lack of alternatives. I am from a country in the Centre and I travelled to Ukraine, Bosnia, Croatia, Slovenia and other countries on invitations from left-wing organizations. In light of the facts, thinking that the EU will choose the free and active citizens’ interest over the interest of capital requires a great deal of optimism and naivety. Citizens are left with just enough freedom so as not to threaten the system, which works against them through economic means. I suggest that you be cautious about your desire to join the EU.

The interest of the private and international creditors is very clear, so is their lack of accountability. But what is the responsibility of the governments that have contracted harmful loans?

In most countries, bank bailouts following bankruptcy has led to a mounting Public debt. Such a transformation of private debt into public debt contravenes the majority’s interest. The concerned authorities should be punished and the loans contracted to save the banks responsible for the crisis should be cancelled. On the other hand, official claims that a corporate tax cut will attract investors and employers interested in fair play are highly questionable. The first inevitable fallout of such decisions has always been the reduction of public revenues. When hand-outs to domestic and foreign capitalists lead to a plunge in government revenues, the government has to take recourse to loans for financing its budget. Moreover, the SMEs are not interested in corporations having their tax rates reduced, as this results in the collapse of the national economy, the development of black market activities Market activities
Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit.
and a slump in public revenues. The third type of government responsibility is the “white elephant” phenomenon: the funding of exorbitant projects, detrimental to the general interest. In Serbia you have the Belgrade Waterfront project [1] - an exceptionally expensive undertaking that depends on external funds and debt. It will not improve the economic infrastructure of either the country or the city. The ever-changing governments will not inherit the debt, the citizens will.

For some time you were associated with Alexis Tsipras and Yanis Varoufakis as an advisor for the public debt audit. Do you think that Greece could have handled the “Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

” differently, without painful consequences?

After many citizen protests opposing the Troika’s imposition of anti-social policies, Tsipras appeared to embody an alternative. In his agenda he had made provisions for debt audits, bank socialization, and the reduction of military expenses. Tense relations with Turkey led to absurd, even useless and exorbitant Greek deals for buying American, French and German arms. Washington, Paris and Berlin forced the Greek authorities to make these illegitimate expenditures and they continue to do so.

On January 25, 2015, election results made it clear that Tsipras would become prime minister and the government was formed two days later. In the meantime, less than a week later, the ECB curbed the Greek banks’ normal access to lines of credit regarding liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. . From then on, each Friday, the Tsipras government was forced to ask the ECB for emergency liquidity assistance Emergency Liquidity Assistance
Emergency funds loaned to the private banks by the Eurozone central banks.
(ELA). This cost more than the ordinary lines of credit and shrouded the bank deposits in insecurity (which led to massive withdrawals of over €30 billion in six months). Under normal circumstances the government would have adopted a self-defensive approach towards the ECB and carried out an audit for the debt, already at 180% of the GDP. No one in their right mind can justify such a debt. Why is it so difficult to see it as what it is? Instead, Tsipras succumbed to pressure from foreign and Greek private banks; from Jean-Claude Juncker, Mario Draghi and the IMF; and he did not punish banks that had carried out illegal or suspicious operations. Likewise, he did not suspend the debt service Debt service The sum of the interests and the amortization of the capital borrowed. . A government that claimed to be progressive had conceded way too much.

<span lang='fr'>Image du projet Belgrade Waterfront</span>

Did you think that Alexis Tsipras was changing his mind about the course of Greek politics?

Many people thought so after six months, in June, when the separation from the “troika” was inevitable. The government had asked the Greek people, who are highly politicized, whether or not they wish to keep bending to the creditors’ demands. A few days before the referendum of July 5, 2015, the ECB had again put pressure by closing the Greek banks to scare citizens. Despite this blackmail, the referendum had clear results. 61.5% of the Greeks voted No and rejected the demands of the creditors i.e. the troika. This was very courageous, but Tsipras was less brave than those who elected him. I am convinced that he was asking the people to vote “no” while he expected and hoped for the “yes” vote to win. He did not respect the electorate’s wishes. This caused a trauma, a terrible disappointment, not only in Greece, but also wherever people want a fairer world. The troika’s sadism towards Greece after the referendum only aggravated this trauma.

The commission established by the President of the Greek parliament carried out a debt audit. Did Tsipras and Varoufakis make use of its findings and recommendations?

Never. History will remember Tsipras as a traitor. The same cannot be said of Varoufakis. On July 15, 2015 in the National Assembly, with 30 other Syriza MPs and 5 ministers, he finally voted against the capitulation to the “troika”. We will remember that. In fact, his new book Adults in the Room: My Battle with Europe’s Deep Establishment is not very credible. He thought, just like Tsipras, that it is possible to coax Lagarde, Juncker, Merkel and Schäuble. On one hand, on February 20, 2015, he signed a contract with the eurogroup where, as Finance Minister, he pledged to service the debt as per schedule and continue privatization. On the other hand, in his book, he says that he had been trying since March to convince Tsipras to oppose the IMF and the ECB. Why did he never challenge a policy that he disagreed with? Moreover, in his book, he says that he wrote seven resignation letters but tore them all up. He should have been more transparent and politically more resolute and radical regarding the EU and the IMF. He said something publicly and held an absolutely different view.

You mentioned the “sadism of the creditors”; on the other hand, we keep hearing about the Greek people’s laziness and irresponsibility. Which one is the truth?

The richest Greeks managed to evade tax, but the middle and lower classes were forced to pay it. If the Greeks fail to pay the state it’s considered illegal and their minimum social rights are denied. They are no longer citizens. It has nothing to do with laziness. For example, before Tsipras was in the government, 2,500,000 Greeks were suffering from such exclusion because of a debt of less than €3,000. Nadia Valavani, Varoufakis’ Deputy, made an excellent proposal: let people service their debts in 100 monthly instalments of at least € 20 and cancel some portions of it. [2] In the first month, about 700,000 people were back within the system, which brought the Greek government a huge unforeseen revenue. Do you think that the EC and the IMF supported this step? No. They introduced a clause into the third memorandum which stipulated that if someone defaulted twice and if the delay surpassed the deadline by 24 hours, they would be removed from the system. In June 2016, 250,000 people were struck off from Nadia Valavani’s regularization system. Now there are half a million more ‘illegal’ citizens than before.

What do you think of the DiEM25 movement launched by Yanis Varoufakis?

I did not sign the DiEM25 manifesto and I did not participate in this movement when he launched it in 2016. Although many people that I immensely admire participate in this organization’s activities, I do not support them. DiEM25 strives to create from above a transnational organization of the European left before the European Parliament’s 2019 elections, while what we need is a process rooted in struggles and resistance. DiEM25 appeals to the EU and other financial organizations for reforms, but Varoufakis, as a former finance minister, should know better than anyone that the EU only pretends that it can be reformed. The treaties, which are the EU’s bedrock, can be amended only if the member countries agree unanimously, which is unfeasible.

Coming to the euro zone’s expansion and consolidation, what would be the consequences?

The influence on the European economy would be insignificant, perhaps we will see a 1% growth of the GDP. But, even if the euro zone reaches a near abysmal level, it will not collapse because no other alternative is in the pipeline. As for expansion, the strongest economies and the big private companies would be even more powerful without any risk of devaluation Devaluation A lowering of the exchange rate of one currency as regards others. and with a strong support from the EC and the ECB. The peoples entering the EU from the peripheral countries will realise how much the EU restricts their freedom to make decisions democratically. Quite simply, the euro in Germany and the euro in Serbia (even if it should join the EU and the euro zone) are not the same and they will never be. The euro is a currency that strengthens the dominant economies and subjugates the peripheral ones.

Translated by Suchandra de Sarkar in collaboration with Christine Pagnoulle.

Source: the Serbian weekly NIN

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 Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), 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, etc.
See his bibliography:
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. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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