Greece : The IMF and Lagarde get it wrong

31 May 2012 by Eric Toussaint , Damien Millet

Christine Lagarde, managing director of the International Monetary Fund 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.
(IMF), has made a declaration concerning Greece and Africa that requires explanation. The third world debt crisis started thirty years ago. Under strong and increasing pressure to export, the poor countries bore the brunt of the heavy increase in 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 the collapse of commodity prices orchestrated by the international financial establishment. Of course, the corruption, totalitarianism and megalomania of some of the leaders of the countries concerned made matters worse, but were not the original cause. Africa was particularly affected, living conditions have seriously deteriorated and the social indexes are alarming. Public health and education systems have been shattered by the demands of the creditors, conducted by the IMF. Questioned about Greece by The Guardian, Christine Lagarde said: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair between three of them, and who are very keen to get an education.”. [1] Christine Lagarde did not say that Niger has been living in conditions created by the IMF for more than 25 years. She is fully aware that the situation of the school children in Niger is the result of IMF policies.

A quarter of a century later, Greece is the first Euro-zone country to be subjected to the harsh crisis that became visible in 2007 - 2008.. As previously seen for the countries of the Global South, the repayment of the debt was imposed as the the top priority by Greece’s creditors, notably big French and German private banks. For this, the IMF, the European Union (EU), and 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.
) have imposed a series of totally dramatic austerity plans on the Greek population. Today, on top of a very important economic crisis, Greece is also going through a serious humanitarian crisis. The Greek people are aware of the damage caused by IMF policies and have used the urns to express their rejection of austerity, after having already staged a dozen general strikes, numerous street demonstrations and repeated occupation of public squares.

In the recent elections on May 6, Greek voters sanctioned the coalition forces which had applied austerity plans and surrendered to the dictates of 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.

(the IMF, the ECB and the European Commission). New Democracy and the PASOK (Pan-Hellenic Socialist Movement) thus paid the price of their total submission to Greece’s creditors. The far right party, LAOS, a member of the coalition previously in power, has practically disappeared from the political scene.

Syriza, the main radical left-wing coalition and now the second political force in the country, has campaigned for the rejection of austerity policies, the cessation of payments and an audit of the Greek State’s public debt. Their demands include a total recasting of the treaty on the functioning of the European Union and the status of the ECB; the restoration of salaries and pensions, slashed after agreements signed with the Troika; an authentically redistributive system of taxation; an audit of banks and the nationalization of those which have received public funding; and finally, an end to the immunity enjoyed by members of parliament and public representatives.

Many Greeks wish for a government that will show the same loyalty to the people as previous governments have shown to the national and international entities responsible for the collapse of Europe. The majority of Greeks want to remain within the European Union and the Euro-zone, while at the same time demanding that their rights be respected – this, too, is the position defended by Syriza, with the aim of foiling the plans of the Troika and the banks.
And this is why their democratic choice is meeting with such fierce opposition, both on the international scene, and within the country. The Greeks are made out to be the champions of irresponsibility, tax-evasion, corruption and laziness. Threats of sanctions against Greece, should the people make the wrong choice, have been formulated by the heads of EU States and governments. This campaign of intimidation is destined to persuade the Greeks that they should give up the idea of taking their fate into their own hands. The powerful means of communication and the blackmail used in the pursuit of this goal are also intended to persuade the people of other European countries, and beyond, that there is no alternative to the choices imposed by those who uphold the system.

Christine Lagarde has also contributed to running down the Greek people. In the above mentioned ’Guardian’ interview, regarding the Niger children who only have two hours of school a day, she continues: “I have them on my mind all the time. Because I think they need even more help than the people in Athens» Concerning Athens she said, “Do you know what? As far as Athens is concerned, I think about all those people who are trying to escape tax all the time.” She also has a thought for the unemployed and those without social cover: “I think they should also help themselves collectively... By all paying their tax.

Not only does this reveal complete ignorance of what is happening in Greece – for while the shipping magnates and the Church escape taxation, the population certainly does not: VAT has been heavily increased, and new rates imposed — Lagarde’s words also show the extreme scorn the IMF has for the people of a country it is supposed to be helping through a very difficult situation. The primary cause of these difficulties is the deregulation of the financial system, unfailingly supported by the IMF, and secondly, the measures imposed by the IMF and the European leaders since 20th May 2012.

For the icing on the cake: it is interesting to note that Christine Lagarde, who earns 323 257 euros a year plus 57 829 euros ‘weighting’ (indemnities for extra costs), does not pay income tax because she is an international civil servant. A perfect case of ’do as I say’, not ’do as I do’. Madame Lagarde, enough is enough! You are in no position to preach to others! The organization of which you are the director and the policies which it implements are bitterly contested by numerous peoples who suffer as a result of them, whether they be in Africa, Europe, Latin America or Asia. The IMF should be abolished and replaced by a new, truly democratic, institution, with monetary stability and the respect of fundamental human rights as its primary objectives. Fortunately, European mobilization against illegitimate debt, austerity plans and the Fiscal Compact are on the increase, in solidarity with the Greek people along with all other peoples under attack.

This would be a suitable response, likely to bring about real social transformation breaking away from neoliberalism.

Translated by Vicki Briault and Mike Krolikowski

Damien Millet is spoke-person for CADTM France) and Eric Toussaint (PhD in political sciences, president of CADTM Belgium, member of the Scientific board for ATTAC France). Damien Millet and Eric Toussaint recently edited La Dette ou la Vie (Aden-CADTM, 2011), which received the award for best political book in Liège in 2011.

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.

Other articles in English by Eric Toussaint (639)

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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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