Committee for the Abolition of Illegitimate Debt

Good day, my name is Éric Toussaint and I chair the Comité pour l’Annulation de la Dette du Tiers Monde (“Committee for the Abolition of Third World debt”, Ed), an international network operating in Latin America, Africa, Asia and Europe. This organisation has been going for the past twenty-five years and deals with the issue of debt from Argentina to Haiti and from Ecuador to the African Countries. Then, with the crisis that exploded in Europe in 2007 and 2008 and became even more deep rooted with what happened in Greece beginning with the so-called “Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

IMF : https://www.ecb.europa.eu/home/html/index.en.html memorandum” by which the Central European Bank, the European Commission and 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.

http://imf.org imposed some very harsh austerity programmes on Greece first, and then on other countries, we were able to see that the problem of debt also exists here in Europe. A country like Italy has a public debt equivalent to 130% of Gross Domestic Product 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. and the media, as well as successive Italian governments, beginning with Mario Monti and now also the new government, regularly talk about this major effort that has to be made to reduce our public debt and therefore apply austerity measures.

One thing that the political leaders and the media want to avoid at all costs is any discussion regarding where this debt originated in the first place, how it is made up, whether it is normal to repay this debt or whether we should be asking ourselves the following question: was this debt made for good reasons, in the public 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. , to improve their way of life, to improve the Country’s infrastructure …. was it made for reasons of public interest and social justice or was it all made in the interests of private individuals, or perhaps those of the bankers themselves who lend money to the State, or political parties or leaders who want to see some major infrastructure projects like motorway or airport projects that cost huge amounts of money and therefore have to be financed by means of public debt? Then, is this debt paid back at normal terms, in other words at reasonable rates of interest or are the creditors, particularly the bankers, abusing their situation?

As we know, here in Europe, 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 is not allowed to lend money to member States, so the monopoly for lending money to the public powers in the Euro zone is left in the hands of the private bankers who take full advantage of this in order to set the kind of 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. that benefit them the most. In other words, they currently lend money to the BCE at 0.25% and then proceed to lend Italy money at 4%. When things are going badly for Italy, they lend us money at 6-7%: in other words, extremely high interest rates.

In this regard, the citizens have to take the initiative when it comes to “auditing the debt”, ask the right questions and come up with the answers themselves, without being too concerned about the fact that there is a major economics and national finance expert. You can ask the right questions and find people with the right kind of technical knowledge. This basic democratic exercise, namely the public audit, is not simply meant to educate and create awareness, but should also assist in terms of future policy choices.

If we feel that at least part of the Country’s accumulated public debt is illegitimate, then we need to work out how to refuse to pay it back. If this debt does not comply with the criteria for legitimacy and legality then we must be able to say “we won’t pay it back”. In that case, we have to mobilise in order to say that we don’t agree with the government continuing to apply a policy of austerity in order to repay a debt that unjustified.

This could even apply to a specific town. In Brescia, Milan and various other centres, we know that loans were taken out with a number of banks at very high interest rates and that certain projects were undertaken involving expenses that were not necessarily in the interests of the municipal residents. Therefore, here too we should do an audit. We are talking not only in terms of national audits of all Countries, for example the national debt of Italy, Greece, Germany, France …, but also local audits of various municipalities or regions (there is also such a thing as regional debt).

I am personally very involved in this kind of thing. I participated in debt audits in Ecuador in 2007-2008: in 14 months, eighteen members of an audit committee established by the Ecuadorian Government analysed and commented on all the Country’s debt, including internal debt, external debt, bank debt, multilateral institution debt and debt with the International Monetary Fund, the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, etc, bilateral debt, in other words Equator’s debt towards other Countries, like Italy for example. Ecuador is in debt to Italy for the construction of a hydroelectric power station on one of its lakes, which was a real disaster for the local population. However, Italy wants to be paid back for this illegitimate debt in full view of the Ecuadorians even though Italy granted the loan to Ecuador so that that Country would get several Italian companies to build the dam. The Italian companies, however, absolutely did not comply with what is called the “tender specifications”, in other words with what they were supposed to do or even the type of dam they were supposed to build and they failed to respect the rights of the local population, etc. So we analysed the “DOL Project” in southern Ecuador and we then inter-alia re-opened discussion of the bilateral debt to Italy.

Having gained this experience in Ecuador, I am trying to make that experience available to various Countries, wherever there are people who truly want to fight alongside my organisation. Our means are limited and what we say to the citizens, above all else, is that they must take thing upon themselves. We can assist by producing certain documents, a citizen’s manual if you will. We have just compiled a new one that is due to be published in English and French and probably also Portuguese and Spanish and will help citizens to grasp some techniques and other people’s experience on how to conduct a public audit.
Spread the word!