The CADTM supports the struggle of the Lebanese people to break away from social injustice and shake off the burden of illegitimate debt

10 March 2020 by CADTM

As the Lebanese government suspends any payment of its external debt from 9 March 2020, the CADTM reasserts its support to the Lebanese people in a struggle that started in October 2019. Popular meetings and marches have been continuously organized in Lebanese towns and neighbourhoods since the start of the upheaval on 17 October 2019 after the government had announced new taxes on WhatsApp calls, cigarettes and petrol. It has been the most significant protest since the citizens’ “Vous Puez” (“You Stink”) campaign in 2015 against poor management of waste and the power cuts that exposed the shortcomings of public services and the failure of a political system defined by corruption and cronyism. Under the catch phrase “Tous, c’est-à-dire tous” (Everybody Means Everybody), demanding that all members of the ruling class should go, the present movement is part of the second wave in the revolutionary process in the Arab region that started with the upheaval in Sudan on 19 December 2018, then developed in Algeria on 16 February 2019 and affected several countries such as Iraq, Iran and Jordan. More generally, it is one of the popular mobilizations on the global scale against the consequences of the crisis of capitalism in imperialist centres from 2008 onward, which aggravates its destructive impact on the Global South.

Protesters, most of them young, coming from various communities and social backgrounds, occupy the squares and organize debates, sit-ins, peaceful marches and human chains that symbolize unity in action independently of their social, geographical or religious origins. They turn away from the confessionalism used by nepotist religious leaders to stir up sectarian cleavages and divide the population. Lebanon’s laws, now inspired by religion, are deeply discriminatory towards women – hence the strong presence of women in the protest, their determination, and their active militant initiative. In early March 2020, marchers also challenged the risks of being contaminated by the Coronavirus as well as intimidation by repressive forces. They demand the immediate departure of the caste of highway robbers who have plundered the public treasury and driven the country into a deep social and economic crisis. From 2005 to 2014, the richest 1% captured 23% of income and 40% of the total personal assets in Lebanon, while the poorest 50% had to 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. half of the income of the top 1%. [1] The Lebanese people are living in a situation of general want, degradation of public services such as education, health care, access to drinkable water, power, sanitation and transport, and rising prices. About a third of the population lives on less than 4$ a day. The rate of unemployment is estimated at 25%, and reaches 37% among people under 25. [2]

Banks are particularly targeted by protesters. Ultra Liberal economic policies implemented since the country’s independence have actually benefited the financial sector, turning it into the main driver of a rent-based economy. Productive sectors such as farming and manufacturing have been neglected. The country imports close to 80% of its consumption needs. The trade deficit and 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. -of-payment deficit have steeply increased. Public debt is unsustainable and amounts to 170% 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 early 2019), according to Standard and Poor’s (S&P). [3] Nearly 40% of the debt is in US dollars.

Lebanon’s economy is supported by hard currency sent by the large diaspora of Lebanese, estimated at more than 12 million persons, [4] living on all continents. The amounts transferred amounted to 8 billion dollars in 2018 and are an important source of dollars in particular. Public aid to development amounted to 1.42 billion dollars for the same year.

These dollar flows from abroad are used by Lebanon’s commercial banks to speculate on sovereign-debt instruments denominated in Lebanese pounds (LBP) at 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.
significantly higher than the international market rates granted by the Lebanese 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.

(BDL). Along with the commercial banks, the latter holds a large share of Lebanon’s public debt. The high 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. rates on government bonds and bank deposits strongly limit investments of capital in the productive economy. As a result the great majority of the population suffer from poverty and unemployment. This fictional edifice constructed by financial engineering is beginning to collapse with the slowdown of flows of hard currencies in recent years in the context of the worldwide crisis of capitalism and war in the region, and in particular in Syria. The expatriation of capital organized by the wealthiest 1% of the population, who dominate the financial sector, is increasing and exacerbating the lack of cash. The banks, who are responsible for the crisis, want to put the burden of it on small depositors, who cannot withdraw their wages and pensions. The demonstrators have directed their frustration at ATMs and front windows of several banks, whom they accuse of stealing their money and aiding the corrupt politicians and high civil servants in transferring colossal amounts abroad. The Lebanese are brutally impacted by the consequences of the strong depreciation of their currency. Their purchasing power has been drastically reduced and the social situation has deteriorated due to massive firings, wage reductions and difficulty in accessing credit and bank deposits in dollars.

The president has announced that Lebanon will not honour payments on the Eurobonds reaching maturity on 9 March 2020. They correspond to 1.2 billion dollars in securities held by the Lebanese central bank, the country’s other banks and a group of foreign investors. Two other payouts are scheduled for April and June, for a total of 1.3 billion dollars. It is the first time in the country’s history as an independent State that authorities have declared a suspension of external debt.

An emergency team 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) was sent in February to study the possibility of restructuring the debt. Already in late June–early July 2019, an IMF team had gone to Lebanon and published a report recommending drastic austerity measures which triggered acute discontent among Lebanon’s people. [5] Application of these unjust measures was the condition placed on the release of 11 billion dollars in the form of loans for financing the Capital Investment Program adopted at the CEDRE conference in April 2018.

Various activist groups demand suspension of repayment of the interest and principal and adoption of a program of reforms to guarantee the social protection, nourishment and health of the country’s people. They feel that the suspension of payment must not take place at the expense of the population. To accomplish that, an exceptional progressive tax needs to be levied on the huge fortunes deposited in the banks in order to spare small depositors. These active groups also demand an end to the dictatorship of the banks and their nationalisation, ousting of the governing oligarchy, sentencing of corrupt officials and the construction of an economy based on social justice.

The CADTM International network supports these demands originating in the popular protest movement in the country. The suspension of repayment of the debt must be a sovereign unilateral act by Lebanon. That can only happen if there is a radicalisation of the current movement and a profound mobilization of all Lebanon’s working people. The suspension must be accompanied by a complete audit of the debt and unconditional repudiation of the share of the debt identified as illegitimate, illegal, odious and unsustainable. The cancellation of public debt needs to be done in such as way as to protect small depositors who have invested their savings in public-debt securities.

The slogan calling for socialization of the banking sector with expropriation, without compensation, of the major private shareholders goes to the heart of the capitalist system and must be a political goal of the protest movement. It needs to actually establish a government of popular sovereignty which can break with dependence on the financial markets. Such a government will institute oversight of capital, take back control of the central bank and create a new, public regulation of banking.

The CADTM international network :

  • conveys its solidarity with the Lebanese people struggling for social justice and popular sovereignty;
  • denounces the repression of protesters;
  • supports the demands of the protest movement for :
    - the suspension of debt repayment,
    - socialization and expropriation of the banks,
    - the downfall of the current capitalist oligarchy,
    - the sentencing of corrupted and corrupting senior civil servants and political leaders.
  • recommends :
    - a citizen audit of the debt,
    - the cancellation of illegitimate debt,
    - selective control of capital movements, allowing international payments in sensible amounts, say less than USD 2,000 a month. Similarly, individuals must be allowed to draw a reasonable amount from their bank accounts,
    - expropriating goods that were stolen by the ruling class and giving them back to the people via a fund for social justice monitored by citizens.

The CADTM international network hopes that the insurgency by the Lebanese people will achieve its political aim and set up a popular government that will :

  • implement a programme of sovereign, solidarity development,
  • put an end to neo-liberal policies and to privatization of public services,

Long live the struggle of the Lebanese people!

9 March 2020

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