In his report on ‘odious debt’ commissioned by the UN [1], Robert Howse, Professor of Law at the University of Michigan Law School, reminds us that the international law obligation to repay debt has never been accepted as absolute in the course of history. Such obligation is limited in at least two essential respects.

On the one hand, international law states that a government’s primary commitment is to the interests of its population. Indeed the obligation to protect human right sis stronger than any other commitment such as to creditors. This is made clear in Article 103 of the UN Charter. The legal argument of the state of necessity is even more explicit in matter of debt commitments: ‘A State cannot be expected to close its schools and universities and its courts, to disband its public forces and to neglect its public services to such an extent as to expose its community to chaos and anarchy merely to provide the money wherewith to meet its moneylenders, foreign and national. There are limits to what can be reasonably expected of a State in the same manner as with an individual’. [2] The State of necessity and the UN charter thus make it possible for a State to find legal arguments for the unilateral suspension of debt repayment when its finances are not sufficient to both meet the basic needs of the population and meet the needs of its moneylenders. This is obviously the case in Greece today.

We should add that economically speaking suspending debt repayment has most positive consequences. As pointed out by Eduardo Levy Yeyati and Ugo Panizza, two former economists with the Interamerican Development Bank, after their enquiry into some forty countries’ defaulting, ‘default episode seems to mark the beginning of the economic recovery’. [3] Joseph Stiglitz, Nobel Laureate for Economy, also insists that the dramatic consequences of a moratorium on debt as announced by creditors to scare the debtor country are just not true: ‘Empirically, there is little evidence in support of the position that a default leads to an extended period of exclusion from the market. […] Thus, in practice, the threat of credit being cut off appears not to be effective.’ [4]

On the other, the obligation to pay a debt only holds if the commitment is valid, irrespective of the State’s financial situation. As pointed out by Howse, the principle of State continuity and contract law are limited by concerns about fairness, evasion, fundamental change in circumstances, bad faith, the signatory’s incompetency, law abuse, etc.

A commission to audit the Greek debt (with citizens’ participation) would make it possible to accurately identify irregularities in the way those debts were contracted, beginning with the debt owed to the Troika (IMF, European Union, European Central Bank) which amounts to about 80% of the total debt in the wake of its bailing out private banks in 2010 and 2012. Indeed loans granted to Greece by the Troika from 2010 were largely intended to pay creditors, mainly French and German banks that half of all Greek debt securities before the Troika stepped in.

A number of irregularities attached to this intervention shed doubt on the validity of debt commitments that are so close to the hearts of Herr Junker and Mme Lagarde.

The Troika’s memoranda infringe a number of basic rights

The Troika is guilty of law abuse, to start with. As pointed out by the UN Independent Expert on the effects of foreign debt and human rights in 2012, private companies and creditors must ‘ensure that compliance with the commitments derived from foreign debt would not undermine the obligations for the realization of fundamental economic, social and cultural rights, as provided for in the international human rights instruments.’ [5] Now the Troika did profit from Greece’s financial distress to enforce austerity policies (memoranda) in exchange for the loans.

Moreover these austerity measures are illegal in the context of Greek national law but also of European and international law. In a report commissioned by the Vienna Chamber of Labour [6], lawyer Andreas Fischer-Lescano convincingly argues that the Troika’s Memoranda encroach on a number of human rights such as the rights to health care, education, housing, social security, a decent wage, private property but also freedom of association and of collective negotiation. These various rights are indeed protected by several legal agreements and conventions that are binding not only for States but for European and international institutions such as those of which the Troika consists.

The validity of the memoranda and of the loans they are attached to is also questioned by the fact that according to European treaties the Troika is not competent to take any measure that affect the right to strike and to form associations, the right to proper health care and education, or the way wages and salaries are negotiated. Finally leaving the European Parliament out in the drafting and signature of the memoranda encroaches on the principle of separation of powers that is protected by European treaties.

Those various legal encroachments allow Greece to repudiate its commitments to implement austerity measures and to repay its debt to the Troika.

They also highlight the gap between the IMF’s and European Commission’s own commitments and what is actually happening. In this respect, Mme Lagarde should perhaps check the first article of the IMF’s statutes which says that one of the purposes of the institution is to contribute to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members. [7]