In the debt system, it’s the people that lose out

5 July 2019 by Eric Toussaint , Cristina Quintavalla , Vittorio Lovera , DIRE - news agency

Eric Toussaint, who presented the Italian version of his book The Debt System in Rome on 18 June 2019, holds that it is possible to “repudiate the dictatorship of the financial markets... Coercion by debt is an integral part of the global capitalist system. It is more than a simple opposition between the North and the South of the planet.”

Every country has a capitalist class that sees its own interest in imposing the debt system. “That is why the opposition to it is inside the system, between the dominant classes and the people”

Every country has a capitalist class that sees its own 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. in imposing the debt system. “That is why the opposition to it is inside the system, between the dominant classes and the people”, says the historian and political scientist, Eric Toussaint, who is the spokesperson for The Committee for the Abolition of Illegitimate Debt (CADTM), an association founded in Belgium in the early 1990s which now has more than thirty affiliates in as many countries. He spoke at the workshop The Debt System: a simple matter of lending money or a system of international oppression? that was held on the 18 June 2019 on the premises of the press agency DIRE. Eric Toussaint held a press conference to introduce the Italian edition of his latest book The Debt System – A History of Sovereign Debts and their Repudiation published by Bordeaux in Rome. “My study concentrates on examining the last two centuries of human history through the perspective of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. . I wanted to show that the hierarchy of the World is intimately tied to the way countries become indebted and how indebtedness functions. I show how governments and the financial powers have wielded the weapon of odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
in order to subjugate countries and peoples. They can only gain freedom through the periodic abolition of illegitimate debt.”

The political scientist claims, “The dictatorship of debt is not inevitable. History shows that several countries have successfully abolished their debts towards their creditors”.

During the press conference on Eric Toussaint’s book, Father Alex Zanotelli, a Catholic missionary for Comboniani Cordis Iesu, made several declarations: “The World’s financial system behaves like the Mafia; it is urgent to establish a moratorium. A debt becomes odious if it causes poverty. Indeed I see little difference between the Mafia and the ruling system. It is an absurd system that instead of being centred around the economy is centred around finance. This system has allowed 1% of the World’s population to possess the same amount of wealth as the remaining 99%”, went on the missionary. “10% of the population consume 90% of the goods produced. Those who possess everything must arm themselves to defend the continuity of the system. Last year $1800 billion was spent on armaments. That is close to $5 billion a day to enable those who control the World’s resources to perpetuate the system. A debt becomes odious when it brings no advantages for the population and engages the complicity of the lenders.”

According to Father Zanotelli, to get out of the debt trap it would be necessary to apply a moratorium on debt repayments, suspend austerity measures, prohibit transactions with tax havens, clamp down on tax evasion, introduce a tax on financial transactions and create a citizens’ movement for the popular voice to be heard.

Cristina Quintavalla (CADTM-Italy) continued, “The European Union practises a debt policy that is stifling Africa. Refusing a society the means it needs puts it on the edge of a new crisis.

Debt is a self-serving mechanism that maintains the dictatorship of the financial markets and forces the States to serve the interests of private investors

Debt is a self-serving mechanism that maintains the dictatorship of the financial markets and forces the States to serve the interests of private investors. This situation is the direct result of pressures from 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), the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

(WB) 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.
) that imposes bail-out policies in accordance with its neoliberal ideology.”

The expert says: “I have in mind the role of the ECB who ‘help’ populations and countries to repay debts they have inherited. This coercion has forced through the underselling of whole economic sectors to private operators, accompanied by denying the rights of populations and the ancestral rights of communities to dispose of their own resources.”

Also, multilateral agreements between Europe and Africa “have devastating effects, such as abolishing import duties. There is yet another World-wide crisis looming. The debt of poor countries increased by 50% in 2016, affecting their 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.
with 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.
between 22 and 42%. All this produces more internal conflict, war, migration, high prices and environmental damage.”

CADTM – Italy is also scrutinizing military spending: “We are witnessing forced militarisation under pressure from NATO NATO
North Atlantic Treaty Organization
NATO ensures US military protection for the Europeans in case of aggression, but above all it gives the USA supremacy over the Western Bloc. Western European countries agreed to place their armed forces within a defence system under US command, and thus recognize the preponderance of the USA. NATO was founded in 1949 in Washington, but became less prominent after the end of the Cold War. In 2002, it had 19 members: Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the UK, the USA, to which were added Greece and Turkey in 1952, the Federal Republic of Germany in 1955 (replaced by Unified Germany in 1990), Spain in 1982, Hungary, Poland and the Czech Republic in 1999.
and with the complicity of the European Union to impose wide-scale restructuring in countries considered to be strategic. It is no coincidence that about thirty communications corridors are being developed, one of which is high speed train links,” concluded Quintavalla.

Father Janvier Yameogo from Burkina Faso declared: “Our President Sankara was assassinated because he refused to pay the debt. The Bible prohibits this kind of capitalism as usury.”

Thomas Sankara “was assassinated by a front of foreign and domestic forces in and around his country who wished to prevent him from tracking down and strongly denouncing injustice and the odious character of poor countries’ debts.” Looking back on the months leading up to the assassination of the Burkina Faso President, the priest has no doubt where the responsibilities lie. A guest of the agency DIRE for this meeting about debt, Yameogo is employed at the Vatican State communications agency but on this occasion he is speaking on his own behalf and he informs us of Thomas Sankara’s declarations at the meeting of the Organisation of African Unity (OAU) – the predecessor of today’s African Union—in Addis Ababa in July 1987, three months before he was assassinated. Sankara declared that the debt could not be paid because it was of colonial origin. He continued with a call for solidarity, “I suggest that we create the Addis Ababa club to refuse the debt all together, because if Burkina Faso alone refuses to pay, I will not be among you at your next meeting. Do not let them assassinate us.” ( The other African leaders present chuckled politely but we know full well that, on 15 October 1987, Sankara was assassinated. Father Yameogo concluded, “Both the Bible and the Koran prohibit this kind of capitalism that, as Pope Francis also says, is usury.”
In July 1987, three months before he was assassinated. Sankara declared that the debt could not be paid because it was of colonial origin

Éric Toussaint: “Salvini will make an agreement favourable to the banks. He could interrupt debt repayments to the ECB, but I don’t believe he will. The ECB holds €360 billion of Italian bonds. If he was truly prepared to face off Brussels, as he says, he would proceed towards ceasing repayment of these bonds. Maybe I’m wrong but I don’t believe that he will do that. If he did he would enter into conflict with Italian bankers and the financial institutions,” said the economist and political scientist Eric Toussaint in reply to a question on the Italian situation.

“In Italy, the studies done by CADTM could be crucial in raising the population’s awareness of the question of unjust debt. Yet I don’t believe the present government will take steps to repudiate debt. Salvini will come to an agreement with the European Commission that favours the Italian banks. We must denounce the illegitimate part of the debt and call for a popular government that will enforce respect on questions of debt justice.”

Vittorio Lovera (CADTM-Italy) launched an alert: “There is the risk of another financial bubble before 2021, which Italy would have to face after the most unfair fiscal reform.”

“All the macroeconomic data available indicate the risk of a financial bubble next year that will be more serious than the one that burst in the 2007-2008 period, causing an uncontrollable explosion of inequality.”

The CADTM has made a thorough study of the effects of tax reforms on Italian debt to explain why, instead of reducing inequality, they aggravate it

“In Italy, those who are calling themselves ’innovators’, promising a reduction of taxes to relaunch consumption, are in fact driving the country in the opposite direction. The CADTM has made a thorough study of the effects of tax reforms on Italian debt to explain why, instead of reducing inequality, they aggravate it.”

“Cumulated losses of tax revenues since 1974, caused by reducing taxes on upper bracket contributions, total €146 billion that the State recovers by issuing new bonds for the banks to purchase” says Lovera. “In this way debt and compound interest have increased by €295 billion, the equivalent of 13% of public debt that in April of this year rose to €2373 billion. It is not sure that there is a shortage of money; there can be as much as is required. In fact, Italy is a virtuous State. If the deposit banks were to assume their role as local financiers there would be far fewer problems.”

On the debt question Toussaint said: “a new international crisis has started. It is not as spectacular as in 1982 but we shall shortly be seeing its consequences.

“The next International debt crisis has already started: this time it has less spectacular characteristics than in 1982. We shall see in the coming years, new developments that will require new understanding from the Citizens of Europe in order to react appropriately. Rather than once again blaming the citizens of the ‘periphery’, whether within or outside of the European Union, , it is essential to understand that the capitalist system itself, and the debt system that is an integral part of it, are the fundamental causes of indebtedness-related problems.”

In his latest Book The Debt System – A History of Sovereign Debts and their Repudiation published by Haymarket Press, (2019), Eric Toussaint predicts the bursting of a new debt crisis having its epicentre in South America. In light of recent events the author considers that his predictions are confirmed. Argentina has entered into a terrible debt crisis and has had to borrow $57 billion from the IMF, the biggest loan the Fund has ever granted. Argentine currency has lost 50% of its value and interest rates are at around 45%. We see – as he predicted in 2017 – the beginning of a new international debt crisis. It is a little slower because the President of the US has held the US Federal Reserve FED
Federal Reserve
Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank :
in check from programmed interest rate changes. “Generally,” says Toussaint, “it is the decisions taken by the central powers and their central banks that are the cause of crisis in the peripheral countries. Last year it was Argentina, but look also to Africa. Mozambique offers a terrible and classic case of a population suffering from indebtedness. Many other African countries and people are directly threatened by this new crisis.”

Translated by Mike Krolikowski and Vicki Briault

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 (621)

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Cristina Quintavalla

membre du CADTM Italie

Other articles in English by Cristina Quintavalla (2)

Vittorio Lovera

membre du CADTM Italie



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