Committee for the Abolition of Illegitimate Debt

Eric Toussaint, a specialist of the third-world debt, considers that Greece should default and audit its debt to point to creditors’ responsibility and radically reduce the debt stock Debt stock The total amount of debt .

Europe’s current indebtedness is deeper than that of South American countries. In most cases the ratio between external debt and GNP Gross National Product
GNP The GNP represents the wealth produced by a nation, as opposed to a given territory. It includes the revenue of citizens of the nation living abroad. has reached 40% in 2010 in South American countries; in Greece, Spain, Portugal or Ireland, it is well beyond 100%. Though governments and the European Commission focus on public debt, private debt is far higher. In Spain, public debt accounts for some 17% of the total debt. The increase in the European public debt is the consequence of three elements: the tax counter-reform that started in the 1990s and reduces state revenues by offering tax breaks to the wealthy and to private corporations; the cost of governments bailing out private banks from 2007 onward, and the fall in tax revenues due to the economic recession in 2009. While social expenditures of European governments have in no way increased public debt, these will be slashed by austerity measures. Moreover the huge debt of some private companies might be turned into public debt if we do not watch out.

This is the way Eric Toussaint, an economist and historian who has studied public finances in countries of the South since the 1980s, analyzes the situation. According to this Belgian expert who works within the Committee for the Abolition of the Third World Debt (www.cadtm.org ), Greece ought to default, set up an audit of its debt to determine creditors’ responsibilities and renegociate repayment while enforcing a radical reduction of its debt. While in Geneva to present his latest book [1], he emphasized that this solution would save the country from the austerity measures currently imposed by 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 and the EU, which affect the whole population. Some ten European countries are currently ‘helped’ by the IMF.

‘Many of the loans were granted to Greece to buy military material from France and Germany,’ Eric Toussaint explained. ‘After the crisis became manifest, the military-industrial lobby Lobby
Lobbies A lobby is an entity organized to represent and defend the interests of a specific group by exerting pressure or influence on persons or institutions that hold power. Lobbying consists in conducting actions aimed at influencing, directly or indirectly, the drafting, application or interpretation of legislative measures, standards, regulations and more generally any intervention or decision by the Public Authorities. even succeeded in maintaining the defence budget while social expenditure was slashed by more than 20%.’ He recalled that in the very heart of the Greek crisis at the beginning of the year Recep Tayyip Erdogan, the Prime Minister of Turkey, i.e. a country with tense relationships with its Greek neighbour, went to Athens and proposed a 20% reduction of the military budget in both countries. The Greek government did not respond for it felt the pressure of the French and German authorities that wanted to support their arms sales. We should add the many loans granted by mainly German and French banks to private companies and Greek authorities in 2008-2009. These banks borrowed from 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 at low 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. and granted loans at higher rates, which made for juicy short term benefits. They did not stop to wonder whether the borrowers could repay the borrowed capital in the longer term. Private banks thus bear great responsibility for current over-indebtedness. Loans from EU member states and from the IMF are not granted with a view to serving the interests of the Greek population but to repaying German and French banks jeopardized by their own over-adventurous policies, Eric Toussaint claims.

When Eric Toussaint recommands defaulting, he knows what he is saying. He was a member of a committee for the auditing of the Ecuadorian debt set up in July 2007. ‘We noticed that several loans contravened basic rules. In November 2008 the new government relied on our report and stopped repaying bonds that come to maturity in 2012 and 2030. Eventually the government of this small South American country was victorious in a tug of war with North American bankers that held bonds on the Ecuadorian debt. It bought back securities for one billion dollars that were valued at 3.2 billion. Ecuador’s public treasury thus saved some 2.2 billion dollars on its debt stock to which we must add $300 million of yearly 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. that has not been paid since 2008. This gave the government the financial resources needed to increase social expenditure in health 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. , education and help to the poorer layers of the population,’ he explained. He also mentioned the example of Argentina that refused to repay its debt from 2001 to 2005 and pointed to the creditors’ responsibility. ‘Thanks to its unilateral moratorium on debt securities for about $ 100 billion, the country could invest its resources and turn to economic growth again,’ he added. ‘Argentina still has a $6 billion slate with the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

. Since December 2001 it has not paid anything to Paris Club members and feels all the better for it. The Paris Club stands for the interests of industrialized countries and does not wish to make a fuss about Argentina not paying for fear that other governments might follow suit.’ Greece too defaulted for over 60 years in the 19^th century and in the first half of the 20^th century.

The IMF has got it wrong

Eric Toussaint further claims that the IMF is deeply wrong when it insists on imposing austerity on indebted countries in Europe, as had been the case for developing countries. ‘Slashing budgets and freezing purchasing power in some ten countries means sabotaging recovery plans. This is insane since in Europe consumption amounts to 70% of the GNP.’

Our expert further points out that not all countries can respond like Germany. Thanks to its industrial apparatus and a policy of wage squeezing, Germany managed to boost its exports. Eric Toussaint explains that the IMF and the EU enforce the Washington consensus – deregulation – in Europe when it has already had disastrous consequences in developing countries. ‘I cannot see how measures that have failed elsewhere would yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. different results in Greece, Spain or Portugal. Countries like India, China or Argentina have managed because of policies in which the state still plays an important part in economy. India, for instance, will not privatize its railways. Year after year the government spends huge amounts on them, but this also means saving a million jobs and good quality public services. The public railway company runs at 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. each year. Similarly, in spite of pressures, the Indian government has not deregulated the banking sector, which sheltered it from the 2007 financial crisis.’