Committee for the Abolition of Illegitimate Debt

The new austerity plan released on Sunday 2 May is a disaster for the Greek population: for workers in the private as well as the public sector, retired people, or the unemployed, i.e. those deprived of a job. Here are some of the measures it involves:
 Freezing of wages and retirement pensions in the public sector for five years;
 Suppression of the equivalent of two months of wages for civil servants;
 The main VAT rate has moved up to 23 % after 19 and 21%;
 The other VAT rates have also increased (5 to 5.5% and 10 to 11%);
 Taxes on fuel, spirits and tobacco have been raised by 10% for the second time within a month;
 Early retirements (related to stressful work) are prohibited under 60;
 The legal age for women’s retirement will be raised from 60 to 65 by 2013;
 The legal age for men’s retirement will depend on life expectancy;
 40 full years at work (instead of 37, outside study periods and unemployment) will be required to be entitled to a full retirement pension;
 This pension will be calculated on the worker’s average salary over the years instead of the last salary (which means a net curtailing of 45 to 60%)
 The government will reduce its operating expenditures by EUR 1.5 billion (which means less money for education and health care);
 Public investments will also be reduced by EUR 1.5 billion;
 A new minimum salary for youth and long-term unemployed is set up (i.e. the equivalent of the ‘CPE’ that TUs and young people rejected in France).

This is a windfall for financial markets !

 Transports, energy and some regalian services will be liberalized and opened to privatizations;
 The financial sector (mainly banks) will benefit from a funds set up with the help of the EU and 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 ;
 flexibility of workers will be increased;
 Layoffs will become easier;
 The Greek economy is now controled by the IMF.

Since Greece is part of the euro zone, it can neither devalue its currency nor play on 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. . Its debt cannot be restructured either since European financial institutions hold 2/3 of it. These same banks will further borrow from 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.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx (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 ) at a 1% rate in order to make loans to govenments (against interests). As a counterpart to the above measures, countries in the euro zone will lend on an individual basis some EUR 100 to 135 billion over 3 years to Greece at a rate of 5% (45 billion in 2010). Rich countries and banks will thus make money on the Greek people. Christine Lagarde, French minister of finance, forecasts a 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. of EUR 150 millions a year. This will increase the public debt of the Greek state so that it can pay back its speculating creditors !

The Greek crisis is an illustration of the danger represented by the IMF, the EU and finacial markets.

Rightly disparaged for its disastrous structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ programmes, the IMF resurfaces in the euro zone euro after wrecking the economy of several Eastern European countries for two years. It uses the same methods as before, still adapted to the same partners: financial markets and TNCs. Today like yesterday its true nature of arsonist fireman is highlighted. The EU and its Commission too have reasserted their paradigms in the service of an open and undistorted competition. The ECB does not serve the peoples of Europe but banks and financial institutions. After precipitating the Greek crisis via rating agencies Rating agency
Rating agencies Rating agencies, or credit-rating agencies, evaluate creditworthiness. This includes the creditworthiness of corporations, nonprofit organizations and governments, as well as ‘securitized assets’ – which are assets that are bundled together and sold, to investors, as security. Rating agencies assign a letter grade to each bond, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. Ratings are made on a descending scale: AAA is the highest, then AA, A, BBB, BB, B, etc. A rating of BB or below is considered a ‘junk bond’ because it is likely to default. Many factors go into the assignment of ratings, including the profitability of the organization and its total indebtedness. The three largest credit rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings (FT).

Moody’s : https://www.fitchratings.com/ payed by major US banks, the financial markets try to derive even larger profits from their speculative strategies. The PASOK government, the European Union and the IMF provide them with a golden opportunity.

Behind the financial industry we find manufacturing, trading Market activities
trading Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit. and services transnational companies.

While we rightly condemn speculative funds, rating agencies and the financial industry, we keep in mind that they are but part of a greater whole. This unbridled speculation that chokes deprived populations has only been possible for two major reasons:
  successive deregulation of financial markets since the 1980s;
  the choice made by the management of large companies to ‘invest’ their profits in speculation instead of production and employment. Such accumulation of profits originates in a new distribution of wealth that benefits shareholders to the expense of wage earners. Over 25 years their respective share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. diminished by an average of about 10% of the 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. in developed countries. This economic trend, which corresponds to the neoliberal ideology, is the main cause of the economic and financial crisis we experience today.

The various governments that have succeeded each other over the past 30 years in Greece as in other countries of the North, also bear a heavy part of responsibility in the increasing public debts. Tax policies in favour of more affluent households and corporations (taxes on income, fortune and corporations) have significantly reduced budget revenues and increased public deficits, which has led the States to go into more debts.

Those who organized the crisis are spared while the people must pay the bill.

In the PASOK–EU-IMF austerity plan imposed on the Greek people, we only find ludicrous inefficient measures towards some tax justice and no measure whatsoever to counter tax evasion of corporation benefits. The so-called solutions set forward by PASOK, EU and IMF push Greece towards an ever deeper crisis. A minimal recession amounting to 4 points of the GDP has already been predicted for 2010. Small craftsmen and traders as well as small companies will be faced with bankruptcy. Unemployment will explode, and the purchasing power of lower and middle classes will plummet. Inequalities will increase and basic human rights (access to water, energy, health care, education…) are under threat for the more deprived portion of the population.

The Greek people’s anger is ours too. CADTM fully supports all mobilisations against the austerity plan.

Alternative solutions are possible !

 The repayment of Greece’s public debt must be immediately suspended and a public audit must be organized to determine whether it is legitimate or not.
 Cancellation measures must be taken and the financial return on the debt must be taxed at the maximum income tax rate.
 Tax measures can be taken immediately to restore tax justice and fight tax evasion. _ According to the accounts of the Greek Treasury civil servants (pointed out as scapegoats) and workers declare higher incomes than such professions as chemists, lawyers, GPs, or than bank managers! Almost all corporations (including shipowners) declare their benefits in countries with a more favourable tax system (such as Cyprus) or hide them in tax havens. The Orthodox Church still benefits from exorbitant tax cuts on its movable and immovable property. There is money in Greece, but not where the austerity plan wants to find it!

At CADTM we declare our solidarity with the Greek people that will go on strike on Wednesday 5 May. Everywhere in Greece as in other European countries solidarity through mobilization must become more manifest. Greece is under attack today but we all know that tomorrow it will be Portugal, Ireland or Spain, and the day after all the euro zone may be affected, including its ‘richer’ countries.

We rejoice at the first declarations of solidarity and the first support mobilizations in front of Greek embassies. We must go further!

The whole European social movement must stand next to the Greek people! European populations can only win from a common protest! CADTM will be part of it !

Translated by Christine Pagnoulle