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Plan B doesn’t include a reform of the EU
by Eric Toussaint , Amanda Andrades
17 March 2016

Éric Toussaint (Namur, Belgium, 1954), PhD in Political Science from the University of Liege and Paris VIII, has spent at least 26 years analyzing and denouncing how the IMF and the World Bank use debt “to discipline a country.” First, focusing on Third World external debt, he founded in 1990 the Committee for the Abolition of Third World Debt, of which he is the spokesperson. In this capacity, he has advised countries such as Ecuador, Paraguay and Timor. Thereafter, when the public debt crisis reared its head in countries at Europe’s periphery, Eric Toussaint brought his struggle to the First World. He is the scientific coordinator of the Truth Committee on Greece’s Public Debt, established by Zoe Konstantopoulou, former President of the Greek Parliament, up to its dissolution.

If you ask Eric Toussaint, who supports the Platform for Citizens’ Audit of Debt in Spain, why the debt audit has disappeared from the agenda of Podemos - who did include it in their programme, he points to “the pressure to have a discourse of realpolitik”, in order to dodge “difficult questions” from the media. He warns:

“It is easier to say that debt repayment is no longer a problem. But the elements that make this debt payment manageable at this time can quickly change with a new banking crisis.”

Proponent of the Plan B initiative (see, he is convinced that not only social democracy is not interested in reforming Europe, it is in fact neither capable of reforming the EU. Therefore, he stands up for the need to “disobey the European institutions”.

What were the main conclusions of the Committee on Greece’s Public Debt that you were leading?

The debt claimed by the Troika, representing over 85% of the Greek Public Debt, is illegal, unsustainable, odious and illegitimate. It is a new debt taken on post 2010 under very clear conditions: policies imposed by creditors that violate international treaties on the protection of human rights. They are also unsustainable from an economic and financial perspective. They will lead to an economic collapse.

But what happens to the debt incurred before 2010?

It was converted into debt claimed by the Troika. We have studied the old debt and it showed clear signs of illegitimacy and illegality as well. This debt was with private banks, mainly generated through the sale of bonds on financial markets. But the important thing is that Greece is paying. To some extent, the new debt is a mean of laundering the old illegitimate and illegal debt.

But won’t there be those who will argue that if Greece indebted itself before the arrival of the Troika, it has to pay?

If the earlier debt is also illegal or illegitimate, then no. But in this case, we can also show that the current debt is both illegal and odious. Therefore, this argument holds no water.

In your report, you say that Greece’s debt has not been caused by excessive public spending. Then what is the cause?

Firstly, it was due to fiscal policies, which like in other countries, reduced taxation of the rich. Secondly, the entry to the Eurozone which came with an enormous influx of financial capital from 15 French and German banks looking how to put their liquidity in Greece. German banks did the same thing with Spanish construction companies and banks during more or less the same period. In Portugal as well. The third element is military spending. In Greece, it is proportionally speaking the highest in Europe. The companies that sold and still sell arms to Greece are mostly German, followed by French, and then American. The governments of these countries pressurised Greece into maintaining very high military spending. Furthermore, being a part of NATO is very expensive because Greece has to carry out a series of missions as it is a border country with the Middle East. Greece’s participation in NATO really must be questioned. And fourth, policies to reduce the social contributions paid by businesses led to lower income for the state. This is a neoliberal policy widely applied in our countries, but it was implemented very aggressively in Greece. This drop in fiscal income had to be offset by more debt.

What was the role of big companies like Siemens?

It has been proven that Siemens distributed bribes worth 200 million euros in Greece. But Siemens was not the only one. Rhein Metal, which deals in arms and metallurgical materials, has also been implicated, as also the American Martin Lockheed, which manufactures F-16 bombers. There was rampant corruption in Greece, but saying that it was an exception is an exaggeration. You in Spain with people like Mr. Rodrigo Rato (ex-vice president of the Spanish government, ex-CEO of BANKIA, ex-IMF director) and other individuals like Botín (owner of SANTANDER, the main Spanish Bank) etcetera know something about corruption, misappropriation of funds and undue accumulation.

In July 2015, the IMF itself declared the Greek debt unsustainable and impossible to pay. Then why did it ask the EU to remain rigid about it being paid back?

Careful - the IMF, which was not willing to back a write-off, also requested this. It’s all propaganda. Christine Lagarde is French. She knows very well that even though she can ask Hollande and Merkel to reduce the Greek debt, if the IMF doesn’t practice what it preaches, there will be no write-off. The IMF is a multilateral body, where pressure from China, Russia and Brazil leads to such declarations.

If there is some level of consensus that the Greek debt is unsustainable and unpayable, it seems as if not writing it off is a political weapon.

The fundamental issue is not about accumulating profits in the short-term, it is about having an instrument with which to discipline a country. Greece is just one example to show the others what can happen to them as well. Furthermore, the ECB, which holds Greek bonds issued between 2010 and 2012, refused to participate in the 2012 restructuring, where the value of these bonds reduced by 53%. The ECB and the IMF charge Greece 6% and 3% respectively, even though they are financed at lower rates. They are really doing good business and since 2010 have received many repayments. Other public creditors, like Spain, are receiving a much lower interest rate and real payments do not take place till 2022. In the first six months of the Syriza government, when Tsipras still refused to give in, the ECB refused to return the abusive interest it had charged Greece. Later, the ECB did return it on the condition that Greece uses it to repay the IMF. Charging interest is a weapon to pressurise and blackmail.

You mentioned Tsipras giving in, but was there another option?

Of course. A decision had to be made in February 2015 on whether to continue till the second memorandum or to paralyse the process. Tsipras and Varoufakis chose to extend till the end of June. They committed to respecting the debt payment timetable and to repaying 7 billion euros. They should have chosen a unilateral suspension of payments pursuant to article 7 paragraph 9 of Regulation 4702, adopted by the European Parliament and the European Commission on 21 May 2013. This would lead to the government having to organise an audit within a structural adjustment programme to determine why the debt reached such an unsustainable level and to identify possible illegalities and irregularities. Furthermore, they would have had to take strong measures with respect to banks and to monitor capital flows so as to stop capital flight. They could also have launched a parallel currency to the euro, a virtual currency, that could not be converted, for the payment of taxes and pensions. All of this would have led to a confrontation with the EU, but this happened anyway and on unequal footing because as they continued to repay the debt, the lending institutions could prolong negotiations and push Tsipras to the result that they did. When the referendum was held on 5 July 2015 and the ECB forced the government to close banks, there was still a possibility under a public mandate - 62% did vote ’no’ - to implement a plan B in more complicated circumstances because the capital flight had already taken place, but it was still possible. There were two occasions where Tsipras refused to activate plan B which was a huge mistake. Probably more than just a mistake.

On this second occasion, Greece risked an exit from the euro. Is it viable for a country to exit the single currency?

Yes. This possibility was not mentioned in February 2015, Syriza had a mandate to remain in the Eurozone with the Thessaloniki programme, which was approved by majority of the party. If another programme had been adopted, Syriza could have implemented an exit from the Eurozone after the elections. In July 2015 when 62% voted against the creditors’ demands, they knew very well that voting no came with the possible consequence of an exit from the euro. Tsipras had the legitimacy to take this decision. Why wouldn’t it be viable to exit the euro? You can implement exit measures that would reduce the negative effects for the people and you can reap the benefits of going back to a sovereign currency.

Is it possible that once the current negotiations between the creditors and Greece are concluded, a debt restructuring could take place?

Yes. A write-off is a possibility but if the structural adjustment policies are extended, it is not going to help the Greek people and economy in any way. If the creditors want to reward Syriza giving in, they would have to grant a write-off, but perhaps, they don’t even want to. Sometimes, the winners want complete destruction. To some extent, a reduction may determine Tsipras’s future, but not the Greek people’s, nor Europe’s.

The austerity measures being enforced in Europe since 2008 are reminiscent of the structural adjustment policies and the Washington Consensus implemented in Latin America and Africa in the eighties and nineties.

Absolutely. Very similar policies are being implemented in Europe, with certain specificities. This is clear in the kind of measures and how they are implemented, like substituting private creditors with public creditors or restructuring debt.

What is the aim?

In Latin America, the aim was to put an end to industrialisation policies and to substitute them with imports. Also to put an end to the Welfare State in some countries. It was a policy that promoted opening to trade and investment and a brutal reduction in social growth. Why? For the same reasons as in Europe today, to pit the workers of all economies in competition against each other. Europe is implementing this extreme adjustment policy to gain market share in its contest with the United States, China and the other BRICS. The current logic is to reduce labour costs as much as possible. In my opinion, this is the rational part because if you don’t look at it from this perspective, it is absurd as it does not generate economic growth. European companies need an increase in internal consumption. Why aren’t they doing that? Because their priority is to bring a historic end to the trade union and workers’ movement and to then return to policies that incentivise economic growth.

But to whom are we going to export when emerging countries markets are now collapsing? This logic doesn’t make sense anymore.

For them, the priority is total destruction. They know that this comes at a cost. They operate in crises, in economic chaos.

Who are ’they’?

Governments and big companies. Almost two centuries ago, Karl Marx said that the collective interest of capitalists is to increase demand in order to increase production and sales and thus make a profit, but their individual interests are different. They want to win commercial battles against each other and to do this, you have to suppress wages. The current logic is what Marx called capitalist anarchy. You cannot assume that there is a collective capitalist interest and a government trying to defend it.

A debt audit was one of Podemos’s strategic lines but now, in spite of the fact that it was part of their electoral campaign, it has disappeared from the agenda. What do you think is the reason for that?

The pressure to have a discourse of realpolitik and to dodge difficult questions from the media. It is easier to say that debt repayment is no longer a problem. But the factors that make this debt payment manageable at this time can change quickly with a new banking crisis.

Is there any possible way for social democracy to reform Europe or do we have to create new ways?

Social democrats are not looking to reform Europe. Social democrats vote with the PP group in 70% of cases. On all matters related to agreements like the TTIP and TISA, they voted together to create a Europe that is even more neoliberal. Reforming Europe is part of their discourse, but not their strategy. The European Union cannot be reformed. Plan B doesn’t include a reform of the EU.

So what can be done?

We have to disobey the European institutions. You have to be undisciplined with respect to European treaties when they are contrary to the interests of the citizens. A left government has to disobey. This does not mean a unilateral exit from the EU, rather it means saying I am in the EU and I prioritise fulfilling the needs of my people, and those of other peoples. After that, let’s see what else can be done.

Translated by Zia Papar, reviewed by Anoosha Boralessa.

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:
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.

Amanda Andrades