Committee for the Abolition of Illegitimate Debt

 Prevent the collapse of the Union?

DiEM25’s plan aims to “prevent the collapse of the Union” (sic). That goal is problematic in itself. Hasn’t the European Union, for decades now, imposed policies on its member States that lower wages and pensions, dismantle labour rights and social protection, privatise public services, etc.? Didn’t that same Union recommend that the member States privatise certain segments of the health-care sector or reduce public spending on health on 63 different occasions between 2011 and 2018? Is this not the same European Union that prevented the Greek people from escaping from deadly austerity policies in 2015? That Union has also made every effort to force other peoples to give up the hope of freeing themselves from neoliberalism. That Union has made no joint financial effort to face the current health crisis, [1] while at the same time spending fortunes to prevent human beings from entering its territory and exercising their right to asylum or residency https://www.cadtm.org/End-the-inhumane-migratory-policies-of-Fortress-Europe.

 Does public debt need to increase?

Why doesn’t DiEM25 question public debt as it now exists, when we know that a large share of public debt was contracted illegitimately, illegally or in some cases constitutes odious debt – that is, against the interests and without considering the needs of the population?

The first of the “basic facts” Diem25 states is: “Public debt will, and must, rise.” It is fundamental for us to begin by asking what purpose these new debts will serve. Will they be used to bail out big corporations and banks, or to invest massively in social programmes and the ecological transition?

The CADTM holds that before stating categorically that debt must increase in order to procure the resources needed to combat the crisis, a suspension of repayment of public debt must be declared in order to free financial resources immediately and provide the time to conduct an audit with citizen participation to identify illegitimate, odious, illegal and/or unsustainable debt.

Furthermore, although the DiEM25 does not mention the subject, it is essential to show that it is possible to free new resources without generating indebtedness – for example, fighting large-scale tax fraud; imposing an exceptional tax on accumulated large fortunes and on the income of the super-rich; specific taxes on large corporations who have made windfall profits during the pandemic (mass retail, GAFAM, Big Pharma and others); permanent taxes on the super-rich enabling redistribution of wealth to aid the majority of the population and in the general 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. ; a heavy tax on jet fuel. All these taxes can be put in place by a national government, since taxation is the prerogative of the States and not of the EU.

Lastly, why doesn’t DiEM25 question public debt as it now exists, when we know that a large 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. of public debt was contracted illegitimately, illegally or in some cases constitutes 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. – that is, against the interests and without considering the needs of the population?

 Issuing Eurobonds via the ECB

In the CADTM’s view, solutions must be put forward that will enable a radical break from the logic of debt and austerity

DiEM25 proposes that 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 issue “Eurobonds” to a total amount of € 1,000 billion. We should first recall the exact nature of the Eurobonds promoted by DiEM25 and others. Despite what the leaders of countries such as Germany, Austria and Holland have declared, the issue of Eurobonds does not mean asking “wealthy” countries to repay the debts of “poor” countries. They would be debt instruments issued not by a State but in the name of the EU as a whole, in order to allow each State to borrow at very low rates. And it’s indeed scandalous for certain European States (Italy, Portugal, Ireland, Greece) to pay much higher rates than the dominant “central” countries (Germany, Belgium, Austria, France, Holland, Finland) whereas the latter are suffering just as much, if not more, from the effects of the health and economic crisis.

The CADTM considers that issuing shared European bonds in the current political context in the EU, namely with an overwhelming majority of governments that are 100% neoliberal, entails unacceptable dangers. It would increase the member States’ dependence on and submission to the European institutions, which – as they have amply demonstrated in recent years – impose antisocial and neoliberal policies in the service of the interests not of the people but of Europe’s big capital. Whether these Eurobonds are issued by the ECB or by another structure within the EU will make very little difference.

So for DiEM25, it is a matter of “sharing the debt burden” (point n°2). Is that really DiEM25’s objective: to ensure that the debt burden should be carried by populations in a fairer way? To the CADTM it would be a grave mistake to restrict changes to the mere modalities of borrowing and lending. Even if there were slightly more solidarity in the way these new debts were repaid, who would end up having to bear the burden of repayment through new austerity measures? Big capital? Or, once again, the populations, as was the case in 2008? Obviously the EU would like the populations to repay debt in order to protect the interests of big capital. In the CADTM’s view, solutions must be put forward that will enable a radical break from the logic of debt and austerity https://www.cadtm.org/We-Won-t-Pay-for-Their-Crises-Anymore.

 DiEM25 proposes to give all EU residents a €2000 payment

Rather than proposing a little money to everyone without questioning the economic logic that triggered and has accentuated the crisis, this crisis must be the opportunity for all forces of the Left to uphold that social, economic and cultural rights are inalienable

This proposal, also known as “helicopter money,” also presents several problems. Firstly, DiEM25 plans to distribute this money to all residents, rich or poor. Really? Secondly, although there needs to be help for people whose revenue has fallen or disappeared, or who simply do not have any, this proposal conforms to the liberal, individualistic logic whereby every individual is considered equal to every other, despite the fact that the crisis has highlighted the terrible inequalities which characterize our society. In the CADTM’s view, salaries, pensions and the various social benefits and allocations must be increased. The real income of the popular classes needs to increase, as do contributions being paid into the public and collective system of social security. Public spending must also go up in favour of essential public services, beginning with the public health system, and also public education. The health crisis has revealed a crucial truth: that instruments in the community, meaning the social security system and public services, are the most efficient in overcoming crises and fighting inequality. If there is any “free money” to be dished out by the ECB, we believe that it should go first and foremost to strengthening those communal instruments.

Undocumented people should also be regularized and given access to social welfare or a decent job with a proper legal contract.

DiEM25 also proposes using banks to get the ECB’s €2000 payments to European residents. This would mean the ECB providing banks with the money, for them to make it available to the public. Now in all EU countries, it is the big private banks that rule the roost. So the proposal would further reinforce private banks just when socialization of banks [2] is what is needed... something DiEM25 signally fails to mention. Indeed DiEM25 does not make any positive proposal for ending the domination of private banks in the realms of household and State finance.

Rather than proposing a little money to everyone without questioning the economic logic that triggered and has accentuated the crisis, this crisis must be the opportunity for all forces of the Left to uphold that social, economic and cultural rights are inalienable. Now is the moment to bring forth a series of strong demands and 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). such as housing for all, healthcare for all, liberation of undocumented people held in detention centres, social benefits enabling everyone to live decently, public services such as health and education free at the point of delivery and also all the public services concerning aid to dependent people and home-based services.

 DiEM25 proposes to set up a European Green Recovery and Investment programme

DiEM25’s proposal is very succinct. It has a good side (reinforcing the funding of public services and public goods) and a bad, when we read in the preamble to the plan that DiEM25 regrets that the EU has seen a reduction in its “capacity to compete with China and the United States in the technologies of the future.”

Regarding green investment, we have already stated in an article on DiEM25’s proposals for the European elections (see https://www.cadtm.org/Varoufakis-dream) that we do not want any deal at all, either with bankers or those responsible for destroying the planet.

 Conclusion

To change the balance of power in favour of people’s interests, we should combine forces and all carry forth the demand for immediate suspension of public-debt repayments, and insist on the cancellation of all illegal, illegitimate and odious debts, in order to provide new financial leeway giving absolute priority to health and human rights

In view of the extreme gravity of the present situation, the CADTM considers that movements of the Left cannot afford to make any proposals that do not fundamentally challenge the economic logic which brought the current situation about.

The CADTM considers that without a change in 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. of power, not only will these thousands of billions of euros not serve the interests of 99% of the population, but they will contribute to even more damage.

Instead, to change the balance of power in favour of people’s interests, we should combine forces and all carry forth the demand for immediate suspension of public-debt repayments, and insist on the cancellation of all illegal, illegitimate and odious debts, in order to provide new financial leeway giving absolute priority to health and human rights (see https://www.cadtm.org/Fighting-Covid-19-Why-and-How-to-Suspend-Debt-Repayment-Immediately).

Translated by Snake Arbusto and Vicki Briault (CADTM)

• In Dutch: https://www.grenzeloos.org/content/de-plannen-van-diem25-bieden-geen-oplossing
• In Greek: https://www.contra-xreos.gr/arthra/1457-programma-tou-diem25-apenanti-stin-krisi-tou-covid-19-stin-europi-mia-kritiki-tou-cadtm.html
• In Hungarian: http://balmix.hu/hu/transform/43199-a-diem25-terve-a-covid-19-okozta-valsag-megoldasara-europaban