Committee for the Abolition of Illegitimate Debt

Athens blog 5 - A new movement against debt and austerity

Sunday 8 May, 3.10pm

Last night’s session ended well past 11pm, with a really packed and passionate debate about the future of the Euro and whether Greece should default on its debts and withdraw from the Eurozone. The session overran by so much that the translators eventually had to leave after a really heroic struggle of their own to help us understand the debate.

So today we’re sitting in a session to come up with a common statement of solidarity and action which will be launched at a press conference tomorrow morning. Alongside a really packed panel of Greek representatives from trade unions, women’s groups, direct action movements including the ’we won’t pay movement’, local government and farmers representatives, we heard from my counter-part Nessa from Debt & Development Ireland.

Nessa spoke about the changes in the global economy that debt activists are having to deal with. From being a movement primarily expressing solidarity with the developing world, we are having to grapple with serious debt issues in Europe which lend important opportunities for radical changes to the global financial system which would benefit countries both North and South. Unless we understand and work on the impacts of our own debt crisis, we can hardly hope to change a system of lending which has caused such damage and destruction across the global South.

The debt audit movement has a huge amount of work to do. First activists in Greece and Ireland will start looking into the debts accumulated in their own countries to help make the case for a full, official debt audit. Maria Lucia Fattorelli, debt auditor in Brazil and Ecuador, has offered her services – an amazing example of Southern solidarity with the problems being experienced in the developed world. There is a need to connect with groups in Portugal, the latest European country to experience an 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 / European Union ’bail out’. We also need to do much more work with trade unions, community groups and faith groups.

Maria Lucia is telling Greek activists that the brutal experiences of Latin American movements against their own debts means that activists today don’t have to re-learn all the lessons of the past. Indeed this conference has been a means of two-way support and solidarity. Greek campaigners knew very little of the ’Third World’ debt crisis and contacts have been made here which will hopefully lead to a more global outlook. But Southern activists also see the European crisis as being a vital component in their long-term quest to transform finance. It provides an opportunity for a truly global movement.

It’s incredible for a debt activist to have hundreds of people crowding into a conference for a whole weekend to passionately discuss debt audits and the reform of the financial system. I think we are all convinced that campaigning against developing world debt, impoverishment, inequality and injustice cannot hope to succeed unless we can make connections with the injustices being experienced by people in our own societies. If we are unable to confront injustice on our own doorstep, there is little point in pretending we can confront it half a world away.

If the lessons of the ’Third World’ debt crisis had truly been learnt, Europe would not be experiencing the kind of deep crisis currently convulsing its society. The task in front of us is huge. But there has never been a better opportunity to overhaul the financial system – and unless we take this opportunity much more damage will be inflicted in coming years, not just in Europe but throughout the world.

Athens blog 4 - Removing the mask of financial power

Saturday 7 May, 8.15pm

Panel of speakers

’Third world’ debt has never been a big issue in Greece, so the conference here is proving an amazing way of telling people not just about the financial system, but about poverty, inequality and power at a global level. The conference, as we hoped, should convince people that the problems they are experiencing are global problems which require bonds of solidarity if we are to overcome them.

Debt audits were viewed by all participants from the South as a key means of putting the justice of debt on the agenda, and opening up economic space to democratic control. Indeed, even in countries which do not have a debt crisis like the UK, a debt audit process can be seen as a means of democratising the debt and financial system. In the words of Andy Storey from Ireland, “it can remove the mask of financial power which pulls the strings over our economy and therefore our society.”

Maria Lucia Fattorelli from Brazil is a veteran of debt audits, and told us about attempts in Brazil and Ecuador to audit debts. She explained the debt audit inaugurated by President Correa in 2008. It ended with The Economist calling Correa “incorruptible” after his successful default on bonds following the audit, from which he realised a repayment rate of only 30%, led to a direct increase in social spending. This is surely proof that debt cancellation does not need conditions imposed from outside in order to prevent money being siphoned off – the very democratic nature of a debt audit can be enough to ensure the fight against poverty really benefits from the audit.

Eric Touissant from Jubilee’s sister network the Committee for the Abolition of Third World Debt (CADTM) said European societies are being blackmailed by speculators and the IMF. He showed a graph showing how Western European banks doubled their exposure to Greek debt in just three years before the crisis broke. He said this was gambling on returns, and it was very wrong for society to underwrite this gamble. It seems to me there is a continuum between JDC’s campaign against vulture funds Vulture funds
Vulture fund Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors. against developing countries and this much wider battle against the interests of financial profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. being put before the rights, needs and aspirations of ordinary people.

Lidy Nacpil from the Philippines said her country is being given as an example, by the IMF, of what a ’good debtor’ looks like. But for the people of the Philippines these policies have meant a lost generation of development and massive emigration, which has really changed the family relationships in the country.

There can be no ’repayment’ for the damage which these debts have caused. But for the movement in the Philippines, the campaign for a debt audit means mobilising the people who had lost out through those years. In this sense, even if an official audit is many many years away, the campaign for a debt audit is still vital. After many years of struggle, a Parliamentary Committee will conduct a debt audit in the Philippines very soon, and a citizens’ audit is also underway. The results of this audit has produced some unjust debts which the parliament voted to suspend payments on – although the President vetoed this decision.

Finally Maria Lucia really inspired the audience by saying that the campaigns for an audit in Latin America had been run on a shoe string. She said her payment for being an activist was the reward of seeing change. We had to prove that “not everything in this world is for sale. Not everything has a price.”

Athens blog 3 - Lessons from the global South

Saturday 7 May, 2.15pm

The need for the Greek conference has been clearly highlighted by news over night that European finance ministers had held a secret emergency meeting to discuss the unsustainability of European debts, including the possibility of Greece leaving the Eurozone area. In the face of dismissals of these claims by European leaders, noone is clear exactly what is going on, but big moves are afoot.

It was particularly relevant then that this morning’s sessions, which focussed on lessons for Europe from the global South, looked in some detail as to how the ’Third World debt’ crisis had been created and prolonged by all manner of ’bail-out’ and restructuring packages. We heard from representatives from Peru, the Philippines, Brazil, Morocco, Argentina, and Zimbabwe (virtually), who showed how their debt crises were used to force detrimental policies on their countries by institutions like the International Monetary Fund, which set back their economies for decades.

Oscar Ugarteche from the Autonomous University of Mexico showed how many Latin American countries had not even had a high debt-to-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. ratio when the Third World debt crisis begun – unlike Greece and other European countries which already have a high ratio now. He said many parts of Latin America today were finally at a level of growth they last witnessed in the last 1970s – having seen three decades of their development effectively wiped out. Ugarteche called for referenda on debts – as has been seen in Iceland – as well as debt audits, cancellation and the arrest of those responsible for financial crimes.

Alan Cibils from Argentina explained how IMF-promoted policies like the privatisation of social security had played a major role in the build-up of Argentina’s debt. When this debt became unsustainable in the 1990s, the IMF said Argentina had been ’living beyond its means’ – in much the same way as European countries are accused today. In fact, the government had been spending less than it was bringing in, and the only thing transforming this underlying surplus into a deficit was a debt built up through the IMF’s bad advice.

The IMF’s further bad advice to Argentina led to spending cuts which caused a 3-year recession, only ending when the government defaulted on its bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. and bilateral debts, which brought rapid growth. What had been considered by many to be a developed country, was kicked back into the past – something of particular relevance to poorer European countries.

However, Cibils was critical of the Argentinian government’s next moves which failed to build on the default by creating a different form of economic development. The government refused to properly audit its debt or to stop paying unjust debts run up by the military government. In fact they repaid the IMF early to get them out of the country. Today, Argentina’s debt stock Debt stock The total amount of debt is lower than it was because of high growth levels, but the total amount of debt has grown. In spite of rapid growth, poverty remains at 30% and inequality is very high and the majority continue to suffer from a debt-led form of ’development’.

This afternoon we’re turning our attention to real alternatives – and there was a need to set up a spillover room to accommodate everyone. It’s nearly impossible to get in or out of the room so many people are crowding into the doorways.

Athens blog 2 - The causes and impacts of European debt

Saturday 7 May, 8.42am

An absolutely packed conference with over 400 people people standing in every free bit of space, hears from Sofia Sakorafa, MP and former member of the Government who refused to sign the IMF/ EU bail-out package and walked out of the Government. She has become a very big name in Greece as a result, and listening to her moving opening I understand why. Here’s the drift, using some of her amazing language, very roughly translated:

“The most powerful form of resistance is to regain our vision. We need to convince people that somehow, somewhere on this planet, things can be done differently. That there is more in the world than a shadowy financial system and the desire for profit. There is history, culture, people."

“Knowledge is the answer to all forms of violence, suppression, exploitation. This is the core belief and purpose of ELE [the name of the new grouping which has organised this conference]. ELE believes in freeing people and enabling people to reject and change things. ELE believes in waiting for the people to find the answer but at the same time being impatient for the people to find the answer. ELE believes in rejecting everything that divides us and accepting everything that unites us.”

The last point is very pertinent because it has taken a long time for ELE to bring together all the different organisations and parties which today support the debt audit. Indeed the fact that this conference is happening is testament to the concrete progress which the severe austerity has brought to Greek activists.

Then straight into some presentations looking into the causes and impacts of the European debt crisis. Some shocking figures from Greece – apparently 1,000 people are losing their jobs here and the suicide rate has doubled.

We also heard from speakers that the debt crisis has become an excuse for a series of measures that are not really anything to do with reducing deficits but creating a more ’free market’ economy focussed on profit making.

Andy Storey from Irish justice group Afri gave a great presentation on the causes and impacts of the Irish debt crisis. Like Greece, most people think Ireland’s debt is unsustainable in the long run and it will have to be restructured. Indeed the debt-to-GDP ratio is expected to rise from the already unsustainable 90% to 120% in 2013. However, by that time the private creditors of the banks have been bailed out and the ultimate ’creditors’ will have become the tax paying public of other European countries through the bail-outs. In other words, those most responsible will have got away with reckless behaviour and it will become a battle between the peoples of different European countries as to who will pay what.

A German parliamentarian came and was the focus of much 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 heated exchanges given the hostility to Germany’s position on the European bail-outs. The German MP voted against the bail-out to Greece, believing the terms were totally unjust. He also said groups everywhere should follow Iceland’s example and hold a referendum on the legitimacy and repayment of their debts.

A trade union representative from Poland made a really important point that goes right to the heart of the debt debate – that debt is not necessarily bad in and of itself but that all too often debt is used as a tool of redistributing income in society from the poorer to the richer parts of society. In Poland – as in the US and many other countries – debt grew as taxes on corporations and the richer part of society were decreased. This mirrors the situation in many developing world countries, where debt has been used in developing societies in corrupt ways, or providing no benefit to the majority in society, but that very majority ends up paying for those debts.

Finally a delegate from Spain said he would work to try and ensure a debt audit committee was launched in Spain – which suggests that this movement is really spreading.

Athens blog 1 - Building a movement for debt justice

Friday 6 May, 2.42pm

As the details of Portugal’s 78 billion euro ’bail out’ package start to become known, I am attending a conference in Athens which is trying to build an alternative to forcing the public to pay for the reckless behaviour of the banks.

Portugal has become the latest country where a care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. taker Government is rushing through austerity programmes to protect the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. sheets of European banks at the expense of ordinary people. In return for its IMF/ EU bail-out, Portugal will have to freeze civil service pay and pensions, reduce compensation to laid off workers, and cut unemployment benefits at exactly the time unemployment figures are reaching record levels. In addition, big infrastructure projects are being put on hold, nationalised Portuguese bank BPN will be sold off at firesale prices and the government will make 745 million euros of cuts to its health and education budget.

European commissioner Ollie Rehn, quoted in the Financial Times, calls the measures “a set of pro-growth measures aimed at making the country competitive again and creating jobs – especially for the young people of Portugal.” This is not how many Portuguese feel about a package which is actually very similar to that rejected by the country’s parliament just a few months ago. But democracy has little to do with these measures – any more than it did in Ireland or Greece or indeed scores of developing world countries.

That’s why this weekend activists from around the world have gathered in Athens to put forward a different vision of economics, specifically to build a movement for debt audits. Debt audits have now been called for in Greece and, just this week, in Ireland. Such audits would open up Government borrowing, looking at how sustainable the Government’s debt is when compared to the needs of the country’s people, and how just and legitimate the borrowing was. In the case of Greece, there are serious questions an audit would answer as Andy Storey and Costas Lapovistas pointed out yesterday in the Guardian:

“What is the legal status of debt contracted with the helpful services of Goldman Sachs that presented public borrowing as a derivative transaction? How legal is debt to finance further arms procurement in one of the most militarised countries in the world? Above all, how legitimate is the extraordinary loan of €110bn by the European Union and the International Monetary Fund that it is claimed is needed to “bail out” the country – at the price of ferocious public spending austerity? The loan did not follow the normal procedure for contracting public debt, including approval by Greece’s parliament.”

Unsurprisingly this line of thinking has been rejected by governments who will themselves be implicated in the contraction of unjust debts. So activists are taking two strategies – first to start looking into their country’s debt themselves in so far as it’s possible. And second to build an international movement around the call for debt audits. Audits don’t necessarily sound like a radical concept – but they are in fact the first step towards anything that we might call economic democracy – putting people back in charge of their economies and their lives.

Today’s conference is taking place in the Athens Law School and there’s an incredible buzz around the building. You can watch the conference live at: www.elegr.gr. We’re working on translation. And I’ll be sending back regular reports.

Source: Jubilee Debt Campaign UK