Committee for the Abolition of Illegitimate Debt

Daniel Munévar recalls that in their discussions with 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 , Greek negotiators argued that the “reforms” would not work. And they did this on the basis of the same IMF reports. From March 2015, the Colombian economist collaborated as an adviser to Yanis Varoufakis in the Greek Ministry of Finance on taxation and debt issues. He looked for specific references in the reports of the monetary organization, and then passed them on to the technical group that held the meetings. This was, broadly speaking, the response they received from the IMF representative:

• “Look, if you are not interested in reforming, we do not have any common ground for continuing these discussions; we will pack our bags and leave“.”This is what you have to do”."

The Syriza government understood that there was a critical relationship between the debt write-off and putting the brakes on austerity policies. The 2013 IMF reports recognized the true nature of the loans granted to Greece three years before. “They published it in writing because first there were leaks,” emphasized Daniel Munévar. The first “bailout” loans granted in May 2010 to Greece (110 billion euros) served above all to rescue German and French banks.

• “They were conscious that they approved an unsustainable loan and that this was going against the very guidelines of the IMF. For this reason, they had to change their rules for approving loans.”

With the aim of achieving a write-off to alleviate economic asphyxiation, the Greek government contributed all these arguments to the IMF meetings, and even produced the “papers.” However the response was this: “You need to have this discussion with the EU member states.” One of the conditions laid down by the IMF in the “bailouts” was that it was the number 1 priority lender. Therefore, Greece had to pay them first and only then could the government reach an agreement with the EU member states.

But perhaps the key to loosening the noose preventing a write-off could be better seen in the iron-clad arguments of the European Commission and 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 . They told the Greek negotiators that even if it accepted restructuring the debt, Greece would have to continue with austerity measures. It could not be accepted – this was their basic idea – that the Greek had fewer “fiscal obligations” than the other EU member states that had lent capital to the Greek state. Although it was never said in those many words, the question was raised on an eminently political terrain. Because if Greece was granted more favourable treatment than other countries, it could be understood that a “strategy of confrontation” could achieve results. And this would be an example that would catch on.

Daniel Munévar is a member of the Committee for the Abolition of Third World Debt (CADTM), and regularly writes articles that are published on its website. Furthermore, for six months he worked with economist and former Syriza MP Costas Lapavitsas, analysing the IMF studies on the Greek debt. In a recent text, Munévar talks about Paul Thompson, an outstanding figure in the International Monetary Fund who negotiated Greece’s first two “bailout” programmes. Munévar pointed out: “He was directly involved in all that has happened in Greece during the last six years”, in a break during the Conferences for a Plan B for Europe, that took place in Madrid from 19 - 21 February. Thompson concluded that it was necessary to increase pension cuts to pay off the debt with arguments like countries that are poorer in per capita terms than Greece– for example, some of the Eastern European countries – would be paying the pensions of Greek retirees. However, he did not support the same criteria in 2010, explains the Colombian economist, “when the income of European citizens was transferred to German and French banks. This is the Europe of the IMF.”

In another article published on the CADTM website, Munévar analyses the responsibility of the Greek banking system as an essential part of the crisis. Before the recession erupted, Greek financial entities “lent to people so that they could spend in excess of their income and they flooded the population with credit cards.” Executives of the Bank of Greece used these entities to transfer money directly to its accounts. There were also those who purchased a portion of the bonds of a bank, which conferred them with a seat on the Board of Directors and, from this privileged position, they granted loans to themselves without any obligation to repay them. Or they granted loans, without any type of guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). , to companies that they owned. Daniel Munévar points out “The stories of robberies in Greece are incredible,” saying that they evoke the content of the book “The Best Way to Rob a Bank is to Own it”, published in 2005 and authored by William Black, professor of economics and former regulator of the US banking system during the 1980s crisis. The corruption first began and then continued following the banking bailout. In the middle of the process for recapitalization Recapitalization Reconstituting or increasing a company’s share capital to reinforce its equity after losses. When the banks were bailed out by the European States, they were most often recapitalized with no conditions attached and without the States having the decision-making power their participation in the banks’ capital should have given them. and then the sale of new shares, bankers asked for loans from other financial institutions to buy shares. Daniel Munévar clarifies that the European banking authority EBA
European Banking Authority The body charged with supervising the European banking system and, along with two other authorities, the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), form part of the European System of Financial Supervision.

EBA : https://www.esma.europa.eu/ considers this type of “manœuvre” irregular.

In a conversation with the CADTM economist, the script has to include, almost necessarily, a question on Syriza’s vagaries and Tsipras’ leadership.

• “I think that Tsipras did the correct thing in the electoral campaign that led him to victory in January 2015; he was always very clear in declaring that leaving the Euro was not an option for Greece.”"

When elected president, he maintained the same position. In the referendum held on 5 July, the Greek people rejected (by 63.5% votes against) the conditions attached to the IMF, European Commission and ECB bailout. Only one week after, on 13 July, a meeting of the European Council took place where Tsipras signed the Memorandum associated with the “bailout”, recalls Daniel Munévar.

“If he had decided to not sign the memorandum, Greece would have been expelled from the Euro,” sustains the former adviser to Varoufakis and Lapavitsas. The crux of the question is that Tsipras “did not politically prepare the people for a possible exit from the single currency. This was an error; when one is a leader, you have to mark out the path, and Tsipras did not do this: today he is paying the price.” In the interview, the economist does not disclose his position on the euro, but he did robustly declare: “For a radical process of change, you need to have a mobilized people.” The conditions for “bailout” are “more of the same”, shock therapy applied to a country that has undergone a 25% decrease in 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. , presents unemployment rates between 25% - 30% and youth unemployment approaching 50% since the crisis erupted in 2008. In a joint article published in August 2013, Daniel Munévar and James Galbraith, professor of economics at Texas University and also a former adviser to Yanis Varoufakis, explained in light of the events how fiscal “adjustment” was causing in the Greek economy to bleed.

Beyond a statistic, what was delivered was a very tough political battle where Greece was no more than a “footnote in the great game for European power that Germany was prepared to sacrifice, as acknowledged both in public and in private by Wolfgang Schäuble, the finance minister.” Already by Jan 2016, the European Commission had initiated a fresh offensive in the siege on Greece - this time on the account of refugees.

• “It must increase the cut-backs, increase debt payment and face up to the consequences of the cost of the refugee crisis - something that is a pan-European problem.”

The EU asked the Greek government to strengthen the controls of its border with Macedonia, which refugees cross when going to Central and Northern Europe. Another measure it was pushing was the effective registration of refugees that arrive on Greek territory (in relation to fingerprints and travel documents). In case of breach, Greece could be kicked out of the Schengen area (the European area where internal borders have been dismantled). “This is Europe in 2016,” concludes Daniel Munévar.

Translated by Anoosha Boralessa and Zia Papar