Committee for the Abolition of Illegitimate Debt

he event – which took place in Brussels and was organised by Eurodad and the Rosa Luxemburg Stiftung (RLS) – included speakers from Europe, Asia, Latin and North America, the Middle East and North Africa. The conference began with a public forum in which the key themes were discussed and then explored over the following two days. Themes included debt restructuring options for countries suffering from high debt burdens, the value of carrying out debt audits to help identify and repudiate illegitimate debt, the problems caused by the tight mandates of central banks, and options how to bring 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. and eventually the costs of debt service Debt service The sum of the interests and the amortization of the capital borrowed. down.

MEP Gabi Zimmer was the first to speak and opened the conference by questioning the legitimacy of the Troika as lead manager of the debt crisis in the EU, and telling the audience that everywhere in Europe a new policy is needed that questions how we manage the crisis and takes into account alternatives to austerity.

Other panellists went on to speak of the importance of new international as well as national solutions, with a general agreement that institutions such as 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 , the EU and even the UN, had failed to find a solution to the crisis and that their policies had - in many cases - reinforced it.

Former Ecuadorian minister Alberto Acosta was one of the early speakers. He told the audience that Europe no longer has all of the answers when it comes to solving its debt crisis and described his country’s crippling debt problem in the 2000s and their route out. This involved an audit of the public debt, the discovery of illegitimate debt and finally a slash in repayments. Eurodad contributed to this process as an international advisor and analyst on bilateral debt issues as part of the Debt Audit Commission in Ecuador.

Mr Acosta said it is necessary to do an audit of external debt, and we need to understand that there are corrupted debts, some of which cannot be paid for important reasons. He told the audience not to be afraid of the non-payment of external debt, but added that it doesn’t solve long-term problems either.

Mr Acosta was one of several speakers to positively cite the debt workout of Germany in 1953, known as the London Debt Accord, which saw the nation’s payments cut by half, and extended over 30 years so that there was not a negative impact on growth. He and others questioned why this example is not being followed today and called for debt resolutions that promote rather than hinder development and social welfare.

The panel turned next to Tunisia and Mabrouka Mbarek, a member of the Constituent Assembly and advisor to the country’s president on debt and transparency. She criticised the EU’s intention to make a proposed loan to Tunisia conditional on compliance with a harsh IMF adjustment programme. She described how she is promoting a debt audit bill in Tunisia in order to identify the origins of the loan contracted by the autocratic regime of Ben Ali before the revolution, and where embezzled money ended up. She also flagged that other nations refuse to return assets that were stolen by the former oligarchy to Tunisia until there is better evidence that it was originally public money.

The situation of Greece was explored by Dr Yiannos Milios, a professor at the National Technical University of Athens. He also pointed to a London Debt Accord type conference and restructuring as one way out of the debt crises. But he flagged that huge debt burdens are not just a Greek problem. He went on to call for the politicisation of the 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 and all European institutions, so that the debt problem and social problems are no longer separated. He mentioned that there are technical solutions to unsustainable debt that involve no costs for taxpayers in creditor countries. For instance, if the 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 was to purchase a certain 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. cent of outstanding government debt Government debt The total outstanding debt of the State, local authorities, publicly owned companies and organs of social security. and swap them into bonds which do not gather 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. and can be repaid over long periods, taking the pressure off debt distressed countries.

German MP Axel Troost was the final speaker and gave a different take on the crisis. He called for an immediate end to austerity measures and neo-liberal restructuring of national economies. The volume of public debt, he argued, does not matter. It is the cost of paying and thus the interest rates that matter. Key is to bring interest rates down, for example through the introduction of Euro bonds.

He also spoke of plans for debt retirement or partial remission, but not for a full default as in the case of Argentina because it might boost the costs of future borrowing. Rather than a debt audit – which he argued could be subjective - Mr Troost emphasised that the EU needs to do more to raise public revenue, for example through the introduction of a financial transaction tax (FTT), a bank levy and of wealth taxes.

A comprehensive report of the conference and filmed interviews of some of the key speakers will be available on the Eurodad and RLS websites in coming weeks.