May 252016
 

By Eric Toussaint, CADTM, 99GetSmart

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Part Two of the series “Greece and debt: two centuries of interference from creditors”

This series of articles analyses Greece’s major debt crises by placing them in the international economic and political context, an approach that is systematically absent from the dominant narrative and very rarely present in critical analyses. Since 1826, a series of major debt crises have profoundly marked the lives of the Greek people. Each time, European Powers formed a coalition to impose new debts in order to repay the earlier ones. This coalition of Powers dictated policies to Greece that corresponded to their own interests and those of the few big private banks and large fortunes. Each time, those policies were aimed at extracting the tax resources necessary for repayment of the debt and entailed a reduction in social spending as well as decreased public investments. In a variety of ways, Greece and the Greek people were denied the exercise of their own sovereignty. With the complicity of the Greek ruling classes, this kept Greece in a subordinate, peripheral condition.

Recall of Part One, published 12 April 2016 http://cadtm.org/Newly-Independent-Greece-had-an: Newly Independent Greece had an Odious Debt round her Neck

Modern Greece was born shackled to debt from bond issues (in 1824, 1825 and 1833) which together amounted to 245% of her GDP. Three major European Powers (Britain, France and Russia) formed a coalition that amounted to the first Troika, imposed a monarchy, putting a Bavarian prince on the throne, and subjugated the country through debt. The Troika systematically defended the interests of the big banks in London and Paris, ensuring that they would extract maximum profit from the odious debt demanded of Greece. The Greek people, who had to foot the bill for a spendthrift, bellicose monarchy, rebelled on several occasions. While they succeeded in ousting the despot in 1862 and instituting a Constitution granting them certain civil and political rights, they were not able to free themselves of the burden of debt. The major Powers kept Greece in a position of subordination, denying the Greek people the exercise of their sovereignty. The monarchy and the local ruling classes systematically attempted to divert popular discontent towards nationalism and hostilities with the Ottoman Empire.

Introduction to Part Two

According to the dominant version of history, whether untruthful or simply mistaken, during the 1880s Greece was re-admitted onto the financial markets thanks to an 1878 agreement with the creditors who held their 1824-1825 |1| debts and to policies of radical public expenditure reduction. Greece then made heavy use of fresh borrowing and significantly increased its public spending. This, the story goes, was the cause of the 1893debt crisis and suspension of payments. Greece’s inability to manage its borrowing seriously is said to have led the big Powers to impose a financial control commission to oversee the Greek budget. This story is false!

The following translated extract from Le Monde dated 16 July 2015 is an example of what is widely said: “But, as today, the country was rife with clientelism and tax avoidance by the notables. Immediately after Greek independence, the King Otto, the first king of Greece, who was imposed by the European Powers, introduced costly major works projects. The civil service took on any warm body, the army was superbly equipped… It was all paid for by generous loans [sic] from western countries. The government lost control: in 1893, almost half of the country’s tax revenues were devoted to paying the interest on the debt”. |2|

Another example can be found in the 20 June 2015 issue of the Swiss financial magazine Bilan: “Thanks to the agreement that was ratified in 1878, Greece could once again, in 1879, borrow on the financial markets. Over the next fourteen years Greece borrowed the equivalent of almost 530 million French francs from Paris, London and Berlin creditors. Less than 25% of the sums were invested in infrastructures to develop the country. The rest went on military expenditure to finance Greece’s confrontations with its neighbours (with mixed military fortunes)”. |3|

The true part of the story is that the bankers again lent money to Greece. It is also true that the Monarchy spent a lot and waged expensive military campaigns against the Ottoman Empire. Most commentators, always ready to side with the creditors (like the Le Monde journalist who did not hesitate to mention ‘generous loans’, a real oxymoron) |4|, also point out that taxes were inefficiently collected.

Now let’s see what really happened: during the 1880s the bankers of the great Powers (British and French but also German, Belgian, Dutch, etc.) were favourable to lending to countries that were normalising their payments situations. They imposed one condition: the old outstanding debt must be restructured and repaid. Most of the countries who had had repayment defaults accepted these conditions that are very favourable to creditors who then opened their purses to lend money so that countries would have the means to repay old debts. Big capital, then experiencing a new phase of expansion in the dominant countries, was attracted to the new investments and lending possibilities offered by massive capital exports to peripheral countries. This was the beginning of the imperialist phase of world capitalism. |5|

Greek Bond - 1880

Greek Bond – 1880

Other debt restructuring of the same period

Debt restructuring that took place during the 1878-1890 period concerned Greece, Costa Rica, Paraguay, Peru and the Ottoman Empire.

The Greek debts from 1878 onwards. In 1878, the outstanding debts from 1824-1825 were restructured. The creditors obtained that Greece repay the equivalent of the amount she had received in 1824-1825. There was therefore no real debt reduction and Greece recommenced the payments of interest and capital. |6| Between 1879 and 1890 Greece entirely repaid the restructured debt. The debt had not been reduced because new debts were taken on in order to pay the old ones, which meant both series of debts were repaid during the 1880s.

The Costa Rican debt restructuring of 1885. In suspension of payment since 1874, Costa Rica agreed, in 1885, to a debt restructuring satisfactory to its creditors: along with £2 million they gained possession of a part of the railways and 568,000 acres of land.

The Paraguayan debt restructuring of 1885. Paraguay, which was also in suspension of payment since 1874, agreed to pay its creditors £800,000 and to concede to them 2.5 million acres of land.

The Peruvian debt restructuring of 1890. The Peruvian debt restructuring of 1890 was the biggest restructuring of debt for a Latin American country. The terms were very unfavourable for Peru: the creditors repossessed two million tons of guano (a natural fertiliser), gained possession of the whole public railway system, a shipping line on Lake Titicaca, the mines of Cerro de Pasco and, to top it all, a new loan was agreed to fund the repayment of the remainder of the debt in suspension of payment. Finally, it was in 1926 that Peru finished paying the restructuring of 1890 after the suspension of payments that started in 1876.

The restructuring of the Ottoman Empire’s debt. Following a payment default by the Ottoman Empire in 1875, the debt was partially restructured in 1881. The creditors demanded maximum repayment. To achieve this, a financial commission of experts appointed by the “great powers” was established. As Louise Abellard wrote: “An institution was created in 1881, by imperial decree, under the name of ‘The Ottoman Public Debt Administration’. This Administration gained absolute and irrevocable control over several Imperial revenues (customs and excise, taxes on alcoholic beverages, stamp duties, fishing rights, tax on silk, tobacco and salt monopolies, etc.). These revenues were to be allocated by the Administration to the payment of compensation to the creditors holding bonds issued before the default. The Administration was piloted by Europeans (British, Dutch, French, Germans and Italians) directly representing their nations’ creditors. Entirely independent of the Ottoman authorities, they were an instrument of absolute guarantee for the creditors who thus had the assurance that the old and the new investments would be reimbursed. Up to a point, the holders of the bonds, through the Administration, acted directly on Ottoman finances, in their own favour, until perceived prejudice was fully compensated (up to the end of the Empire). The Administration’s prerogatives were progressively extended to the role of guarantor for infrastructure contract payments (particularly railways)”. |7|

Debt restructuring permitted the imperialist countries to launch a new cycle of indebtedness and capital expansion

The debt restructuring that was carried out during the 1880-90s was the means by which the creditors embarked on a new phase of spreading the over-abundant capital available in the central countries (UK, France, Belgium Netherlands, Germany, etc.) all around the world. The granting of new loans was aimed at setting the repayment pump back into motion, since the countries in default needed fresh liquidities in order to repay their defaulted debts. Investments and loans were the vehicles used. In several cases, as we saw earlier with Latin American countries, restructuring took the form, partly, of property exchanged against outstanding loans. The principal criteria of the bankers, and other investors, was not at all the well-being of the debtor country and their ability to manage the funds they were loaned, or even to repay them, but the creation of maximum profitability. Their decisions were based on the necessity to invest all the funds at their disposal in making maximum profit as well as maintaining the country in a state of indebtedness and financial dependence. The creditors were assured that in case of non-payment their own country’s governments would intervene, by military means if necessary, to force the debtor country to keep up repayments and if necessary, colonize it.

In Tunisia, the Ottoman Empire and in Greece, international supervisory bodies with far-reaching authority were created by the creditor Powers (amongst whom France and Britain always occupied important or even highly privileged positions). Greece was in this position from the very beginning, as illustrated by the 1832 convention passed with Britain, France, Russia and the Kingdom of Bavaria, which created the Greek Monarchy and gave absolute priority to debt repayment. |8| An International Financial Control Commission was imposed on Tunisia in 1869 before it went under direct French control in 1881. In the Ottoman Empire the creditor Powers installed twenty local offices throughout the territory (from Yemen to Thessalonika), and employed 5,000 civil servants. Greece’s subordination to the creditor Powers – in fact written into its international “birth certificate” – has changed in form over time but still remains today: from the interference by the British, French and Russian ambassadors in the council of ministers in 1843, |9| to the creation of the International Finance Control Commission in 1898 (which functioned up to the Nazi invasion), not to forget the International Financial Enquiry Commission created in 1857 to watch over the repayment of the 1833 debt.

The impact of the international financial and economic crisis of 1890-1891 on Greece

In November 1890, the City of London was in a situation comparable to that which occurred again in the US in 2008 and which triggered off the failure of Lehman Bros., a credit crunch, an international banking crisis and a worldwide economic recession in 2009. On 8 November 1890 the London bankers held an emergency meeting to plan action, should Baring Bros. fail. On 10 November, the bankers met with the government, who established contacts with the other big Powers in order to coordinate reactions to the crisis. Baring Bros. (unlike Lehman Bros.) was saved, but the financial and economic crisis of 1891-1892 was profound. Among those who took part in saving Baring Bros. was the Rothschild bank (present in London, Paris and other European capitals and an important player in Greek debt), JP Morgan (already the biggest US bank) and JS Morgan (established in London and parent to JP Morgan, with whom they later merged). |10|

Nowhere in the articles on the 2015-2016 Greek debt crisis published by the chief organs of the international press are references to the 1893 Greek debt crisis to be found; nor any link to the international financial and economic situation and the suspension of payments decreed by the Greek Parliament at the time. The crisis that had its origins in London caused an economic recession, a fall in international trade, an international credit squeeze… Greece experienced a serious drop in its exportations and so was deprived of the foreign currency essential to funding its debt repayments. Exports of currants, which represented two thirds of Greek exports, fell by 50% between 1891 and 1893. There were two reasons for this sharp drop: 1. The international crisis and the reduction of demand in the richest countries; 2. The decisions taken in the UK, France and Russia to impose import duties on the currants entering their markets. This was in total contradiction of their own dogma professing free trade and the removal of all import-export duties. |11| The fall in revenue and blocked access to loans from British, French and German banks left Greece no option but to suspend payments. Fifty-six percent of Greece’s revenue was devoted to debt repayments. |12| Another contributing factor was a fall in the value of Greek currency against the pound sterling and other strong currencies. With a devalued currency, the real cost of the foreign debt became unsustainable.

The commentators who accuse Greece of being a country that goes easily into payment default should learn that in the 19th century, Spain suspended payment six times, the Austro-Hungarian Empire five times, Portugal three times, Prussia twice and Russia once. |13|

The military conflict against the Ottoman Empire and the restructuring that followed

The Greek monarchy and the local elite launched a disastrous military conflict against the Ottoman Empire in 1897. Evidently, the great Powers manoeuvred the two parties into war |14| in order to take advantage of their mutual weakening and increase their influence over them, particularly by using their debts. The conflict was costly and the great Powers imposed their will on Greece as much as on the Ottoman Empire. The peace treaty was signed in Constantinople (now Istanbul) on 4 December 1897 under the supervision of the UK, France and Russia (the Troika of the time, in place since 1830), the Austro-Hungarian Empire, Germany and Italy. |15| In 1898 another loan was made to Greece (see Box: The 1898 Bond Issue…) The Troika was again the guarantor of the loan. The loan was granted within the framework of the peace treaty and covered a big indemnity paid by Greece to the Ottoman Empire. The great Powers did good business; as they had control of the Ottoman Empire’s finances, they saw to it that the Ottoman Empire’s creditors were paid. Greece and the Ottoman Empire had the same creditors!

The 1898 Bond Issue and the subjection of Greece to International Financial Control

The Law of Control voted by the Hellenic Parliament on 26 February 1898 is identical to the draft bill drawn up by the International Financial Control Commission (IFC). Greece was obliged to accept all the creditors’ conditions. Under this Law, the IFC controlled all state revenue dedicated to servicing:
- the 1833 loan guaranteed by France, Great Britain and Russia;
- foreign loans incurred by the Greek State between 1881 and 1893;
- the new loan that Greece took on to repay the preceding ones and to pay war reparations to the Ottoman Empire.

The 1898 loan was composed of two parts:

1) A loan for war indemnity to Turkey covering 92 million French francs (4 million Turkish pounds) plus 2.3 million francs (100,000 Turkish pounds) that Greece had to pay for damage to private property.

2) A further loan to cover former debts and the deficit of the year 1897 to enable the debt to be repaid. This came to a total of 55 million francs distributed as follows:
- 26 million francs to cover the Greek State’s budget deficit for the year 1897;
- 2.5 million francs for payments owed by the Greek Government in 1898 to holders of the former foreign debt;
- 26.5 million francs to repay the floating debt or to convert it to gold.

The total new loan taken on by Greece thus came to 123.5 million francs (28.5 + 95), plus the 26.5 million francs of debt conversion. To this amount a further 20 million francs were to be added, in the form of loans as and when required, to cover the total deficit of the following years.

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Extract from the report of the International Finance Commission from 1898
Article 4 of the Law of Control drawn up by the IFC and meekly adopted by the Hellenic Parliament on 26 February 1898 stipulated that the Commission’s administrative costs, fixed at a maximum of 150,000 francs and including a sum of 60,000 francs to cover the fees of the six Delegates, should be deducted from the product of the revenues concerned. The six delegates represented Great Britain, France, Russia, the Austro-Hungarian Empire, Germany and Italy.The IFC obliged Greece to repay 39 million drachma per year while the average total income of the State (barring loans) came to approximately 90 million drachma. That meant that 43% of State revenue went directly to debt payments. Note that no part of the new loan was intended to strengthen the country’s economy, develop its infrastructure or improve public education. The new loan was intended exclusively to pay off former debts, indemnify Turkey (which in turn needed the indemnity to repay her creditors, who happened to be the same as Greece’s) and to pay off Greece’s current deficit.

The IFC members emphasized that on average the total budget of the Ministry of Education and Cults barely attained 3.5 million drachma, while the civil list (or emoluments of the sovereign) came to 1.3 million, the budget for the police 1.7 million and the Defence (war) budget 15 million. In the IFC’s reference budget there was no specific post for public health. The railway budget was a ridiculous 84,350 drachma (7.5% of the civil list). Note that the IFC forced an IOU of more than 4 million drachma upon Greece, for the heirs of King Otto who had been overthrown by the people in 1862. The annual charge that repaying this debt incurred came to 200,260 drachma, or 2.5 times the country’s railway budget!

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Extract from the report of the International Finance Commission from 1898 – administrative costs of Greece 1892 – 1896
The Commission made it quite clear that in the future, the Greek State budget would make no provision for major public works such as improvement of sea-ports and new railway lines. The Commission considered that any undertaking likely to significantly aggravate budget charges should be postponed until such time as the country’s finances had reached stable equilibrium. This is an explicit acknowledgement of the creditor Powers’ intention to maintain Greece in a permanent state of economic underdevelopment.In Article 11 of the Law, the IFC lays claim to the following for debt repayments:
- all revenue from stamp duty, about 10 million drachma;
- all revenue from import duties collected by the Piraeus Customs, i.e. about 10.7 million drachma;
- all revenue from duty on tobacco, i.e. about 6.6 million drachma;
- all revenue from duty from the monopolies on salt, oil, matches, playing cards and cigarette paper, to which were added all revenue from the emery mine at Naxos (an island in the Cyclades), i.e. about 12.3 million drachma in total.
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Extract from the report of the International Finance Commission from 1898
Who did the IFC entrust with the task of collecting revenue from the monopolies? The monopolies over salt, oil, matches, playing cards and Naxos emery were administered by a Greek-registered joint-stock company entitled Société de régie des revenus affectés au service de la dette publique hellénique or Company for the Control of Revenues Assigned to the Service of the Hellenic Public Debt (an ancestor of TAIPED |16|). The creditors obliged Greece to place this company under the direct supervision of the International Financial Commission and to make it a sort of instrument or organ of control. Furthermore, a designated member of the international Commission would be authorized to attend sessions of the Board of Administration and the General Assembly and the Commission would be able to veto any measure it judged illegal or damaging to the interests with which it had been entrusted. |17|Article 24 stated that all monies received by the Company designated in Article 14 should be entirely paid into the Régie’s accounts at least once a week. Should the revenues mentioned above prove insufficient, the IFC had the right to deduct revenue from the Customs at Laurium (whose gross product was estimated at 1.5 million drachma), Patras (2.4 million), Volo (1.7 million), and Corfu (1.6 million), in accordance with Article 12 of the Law.

IFC members could go in person to the various offices and establishments of all the services whose revenue was concerned, to check on the full implementation of the legal and regulatory measures. They were entitled to see on demand all books, accounts and accountancy documents (Article 36). Article 38 asserted that the Law of Control itself could only be modified with the agreement of the six Powers.

The conclusions of the International Financial Control Commission’s report provide a fine example of lies and hypocrisy: “In summary, the Commission was inspired in its work by the benevolent attitudes of the Powers where Greece is concerned. In satisfying the legitimate demands of the current creditors, it has taken fully into account the financial difficulties with which the country is faced. At the same time, while it has endeavoured to surround the collection and the use of the revenues set aside for the service of the debt with such guarantees as may afford every security to capitalists, it has been at pains to conserve, to the extent possible, the independence of the Hellene nation and of her Government. The future of Greece now depends on her own wisdom. If she applies herself to being industrious, calm and peacable, to improving her Administration, to developing her agricultural resources, encouraging her nascent industry and extending her trade relations, her financial situation will rapidly recover; her beneficent influence will gradually extend into the sphere of action which is reserved for her and, aided in this noble task by the sympathies of the Powers, she will succeed, through courageous and patient efforts, in conquering in Europe’s East the rank to which the glorious memories of her past entitle her.” |18|

This is typical of the discourse used by the European Commission and the governments of the creditor countries even now, in the 21st Century.

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Extract from the report of the International Finance Commission from 1898 – Conclusions
Sources:
- the diplomatic document (in French): Arrangement financier avec la Grèce, travaux de la Commission internationale chargée de la préparation du projet / French Ministry of Foreign Affairs – Paris, 1898, 223 pages,
http://gallica.bnf.fr/ark:/12148/bp… consulted on 1 May 2016;
- the text of the Greek law implementing the dictates of the international Financial Commission, consulted on 1 May 2016.

It is to be noted that from 1870 the German bankers and Germany were increasingly involved in the Balkans and the Ottoman Empire. The Greek defeat of 1897 was partly due to the military reinforcements and advice that the Ottomans had received from German officers (including generals) sent by Berlin. Bankers and diplomats were active in Athens and Constantinople. Among the countries keen to increase their influence in Athens after independence, Germany was omnipresent alongside the Troika. |19| No sooner had the peace treaty been signed and new loans granted to Greece, than the IFC imposed a new set of conditions on Greece. The Commission took up residence in Athens and took control of a large part of the Greek budget, which continued to be devoted to debt repayments. The Greek government had no authority to change the use of the income or modify taxation, without the agreement of the IFC. This bears a close resemblance to the present situation. The Commission remained in place up to the Nazi occupation of Greece in 1942! |20|

On top of the indemnity that Greece had to pay to the Ottoman Empire and that was diverted to the Great Powers, a large part of the new loan was to be used to continue repayments to the Troika countries for the 1833 loans. These repayments went on until the 1930s. According to calculations made by the economists Josefin Meyer, Carmen Reinhart and Christoph Trebesch (who are regularly associated with IMF research projects), only 25% of the sums borrowed by Greece between 1894 and 1914 were spent on regular projects (debt repayments apart) and investments. Forty percent went on debt repayments and banking commissions. The remaining 35% became military expenditure (the principal suppliers of armament were also the principal creditors and this situation persists today). |21| My own estimates show a much smaller portion of the borrowing being used for regular spending – no more than 10-15%.

Conclusions on the debt restructurings that took place in 1878 and 1898

These facts indicate that the debt resulting from the restructurings of 1878 and 1898 must be considered odious debt. The restructuring of 1878 required Greece to resume repayment of the debt contracted in 1824-1825, whereas that debt was illegal given that its terms were so overwhelmingly favourable to the creditors. This restructuring made repayment of the debt just as unsustainable and could only lead to a new crisis, which broke out in 1893. The restructuring of 1898 served to increase by several degrees the level of coercion exercised on the Greek government and its people, notably through the creation of the IFC. It enabled the six major Powers to grab a very large share of the government’s revenues while maintaining Greece in a situation of dependence toward its creditors.

An editorial comment published in the French daily Le Figaro in May 1898, describes the creditors’ strategy fairly clearly: “The maxim of the old policies was: Divide and Conquer. It has been partly replaced by the new rule: Lend them money to keep your foot on their necks. It would be interesting to make a study of it, for poor Greece, as we have had occasion to study it in Egypt, of that subtle invention of modern genius: the lender’s stranglehold on the borrower, substituted for brutal conquest using old-fashioned bayonets; judicial counsel imperceptibly becoming a counsel of wardship, of government, at first gentle and collective, then harsh and personal, for the benefit of the richest, the most tenacious, the most adroit members of the directory. We would like to observe, at its origin, the tying and the tightening of this noose of silver, the imperial instrument our century has made into its most effective weapon for political aggrandisement.” |22|

It is also important to conduct a study to determine what portion of foreign debt (debt issued in foreign currencies on the foreign financial markets, which must be distinguished from Greek loans in the local currency) was purchased by wealthy Greeks, whether residing in Greece or part of the wealthy Greek diaspora living in Istanbul, Alexandria, Smyrna and Paris. |23| It is certain that these powerful Greek elites had invested a significant part of their financial wealth in Greek securities. What that implies is that it was not in their interest to encourage their friends who succeeded one another in the Greek government to take a firm attitude with the creditors (see the Conclusions as well as the end of the inset with excerpts from Constantine Tsoucalas’s work).

Excerpt of a voucher issued by Greece in 1914, part of a loan of 500 million francs to repay previous loans

Excerpt of a voucher issued by Greece in 1914, part of a loan of 500 million francs to repay previous loans

A few keys to understanding the social and political evolution in Greece from just before the start of the First World War

Excerpts from the book by Constantine TsoucalasThe Greek Tragedy. |24| The selected excerpts give an idea of the development of social movements and the reforms won during the late emergence of a peripheral capitalist state.

“The successive tax increases on essential goods put the main burden on the workers and the middle classes, who had by now begun to organize in commercial guilds and unions. In March 1909 thousands of shopkeepers had violently demonstrated, in Athens and Piraeus, against the unequally distributed taxation. On 14 September a huge rally of over 50,000 (out of a population of under 200,000) shook Athens. While declaring their full confidence in the ‘revolution’, the Athenians went beyond the officers’ (that is, the new authorities who had just come to power [note by Eric Toussaint]) intentions. The demands for a system of progressive income taxation, the protection of production, the transformation of the civil service into a body of true public servants by the abolition of the spoils system rampant till then, an improvement in the workers’ standard of living, and a ban on usury as a criminal offence expressed the class antagonism that had been politically silent for so long. At the same time, the organization of the workers had been strengthened by the creation of numerous trade unions, and the discontent among the peasants had been growing since 1898, when the crisis in the currant trade, which had constituted a staple export, had reduced large strata of the agrarian population to misery. Unrest was especially strong in Thessaly, where the demand for agrarian reform of the large ‘estate-system’, inherited from the Turks, led to a series of violent peasant revolts, between 1905 and 1910, which had been bloodily repressed.”

(…)

“The elections of 1910 were a triumph for the new Liberal party. Venizelos formed his first cabinet, which consisted almost entirely of new men. A period of intense reconstruction and radical reform thus began.”

(…)

“The prerequisite for the reform programme of the Liberals was a constitutional reform. The constitution of 1864 was fully revised, individual liberties guaranteed, and the foundations of a ‘State of Law’ were laid. However, though some of the formal prerogatives of the monarchy were curtailed, the real powers of the King remained ambiguous, a fact which was to have explosive consequences.

On this institutional framework, Venizelos launched an impressive legislative programme. Land reform was the most urgent and difficult problem. A constitutional amendment (1911) was promulgated authorizing expropriation with compensation–though not without bitter opposition from the still powerful landowner class.”

(…) 

“Low wages were exempted from confiscation in cases of debt (1909), the trade union federations of Athens and Piraeus were recognized (1910), Sunday was made a compulsory rest day (1910), a new and rapid procedure was introduced for the adjudication of disputes between workers and management (1912), joint unions between workers and employers were forbidden (1914), and the newly established unions of workers were permitted to negotiate and sign collective labour contracts. Finally a compulsory general labour insurance scheme was introduced in 1914.”

“The fiscal system was also reorganized on a more equitable basis. Progressive taxation of income was introduced in 1911 and death duties were reorganized and greatly increased in 1914.”

Following the First World War at the end of the Ottoman Empire, Germany and Austria-Hungary were beaten, and the Greek monarchy and ruling classes thought that part of the Great Idea – Greece’s annexation of a part of Turkish Asia Minor – was about to be realised. This led to the disastrous military adventure of 1922, during which the Greek army attacked the Turkish army in its territory in Asia Minor. The result was a human and military disaster.

In 1922, “…the attempt to launch a general offensive against Kemal’s stronghold in Ankara ended in disaster. In August 1922, the Greek Army was smashed and fled in disorder before the Turks, who pursued its remnants into the sea, slaughtered thousands of Greeks, and finally set fire to Smyrna in the midst of indescribable chaos. Hundreds of thousands of Greeks were forced to flee to the neighbouring islands or the Greek mainland.”

(…)

“Ten years of war (1912-1922) had resulted in the creation of a country totally different from what it had been before. Greek territory doubled and the population grew even more spectacularly. The 1,500,000 refugees, whose social and economic integration was to constitute the greatest and most urgent problem of the country, changed the population structure completely. The urban population was greatly augmented, especially in the Athens district and the few large towns, where a numerous urban proletariat was created for the first time. Thus while in 1908 only 24 per cent of the population lived in towns of over 5,000 inhabitants, the percentage had risen to 27 per cent in 1920 and to 33 per cent by 1928. Greater Athens grew from 452,919 inhabitants in 1920 to 801,622 in 1928.”

(…)

“The urban scene had also changed drastically after the war. The long years of fighting, the influence of the Russian Revolution, and especially the tragic conditions of the urban refugees, led the working class to organize on a more radical basis. The General Confederation of Trade Unions was created in November 1918, and the Greek Socialist Party a week later. In 1922 it adhered to the Comintern, and two years later it became the Communist Party of Greece.”

(…)

“The total decay of the Ottoman Empire and the Egyptian Khedivate during the latter half of the nineteenth century enabled the Western powers to impose upon them a quasi-colonial status. It was the Greek merchants and bankers who were the major beneficiaries of this development, and between 1880 and 1910 colossal fortunes were made in the Mediterranean periphery. If the 1922 crisis eradicated the Greek element from Turkey and Bulgaria, their position remained unchallenged in Egypt and to a certain extent in Rumania, where the most influential Greek financiers continued to make their fortunes. Typically, many of the closest advisers of Venizelos in the economic and banking field belonged to this group. This undoubtedly helps to explain Venizelos’s automatic obedience to British and French diplomatic interests. It also provides a deeper understanding of the reluctance of Greek capital to centre its interests upon domestic development.”

Greece - 1832-1947

Greece – 1832-1947

8-5-1042f-1The debts from the 1920s to the Second World War
The defeat of Greece’s military adventure into Turkish territory in 1922 had dramatic effects on the civilian population. Approximately 1.5 million Greeks, the majority of whom had been living in Turkey, were forced to cross the Aegean under catastrophic conditions and return to Greece, which had lost the part of the Ottoman territory she had been granted after the First World War under the Treaty of Sèvres. |25| This massive influx of refugees led the Greek authorities to request aid from the League of Nations (the “ancestor” of the UN), which granted loans to Greece between 1924 and 1928 for a total amount equivalent to 20% of Greece’s GDP at the time. As guarantee, the League required that harsh austerity policies be applied. Both the League of Nations’ representation in Greece and that of the IFC, created in 1898, were dominated by the creditor powers, in particular Britain.

Repayment of the loans granted by the League of Nations was added to a series of other repayment obligations – the continuation of the repayment to Britain and France of the remainder of the debt of 1833 (Russia has received no repayments since the Bolshevik Revolution of 1917), repayment of the debt of 1898, and repayment of the war loans granted during the First World War by Britain, the USA, Canada and France (these war loans amounted it 55% of Greece’s GDP). |26| The total debts owed by Greece were more than 100% of her GDP, and the amount paid each year accounted for more than 30% of the revenues in the Greek budget and approximately 10% of GDP. That gives an idea of the effort imposed on the Greek people and on the country’s economy.

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For as long as the international economy was undergoing a phase of growth, as during the period 1898-1913 and the 1920s, Greece was able to post a primary budgetary surplus and cover its debt repayments (that is, under IFC constraints, it managed to generate revenue in excess of expenditures excluding debt service, which meant that it could use the surplus for repayments). Greece also received capital inflows, as during any period of growth of the world economy. The creditors granted Greece new loans so that she could repay the old ones.

Greek Bond - 1925

Greek Bond – 1925

The situation changed radically starting in 1930-1931 when the effects of the new international crisis that broke out on Wall Street in October 1929 began to be felt. Greece’s revenues from exports (mainly tobacco and currants) again collapsed, several Greek banks failed in 1931, and Greece’s currency was devalued by 50% following the British decision to suspend the exchange system based on the gold standard. |27| This devaluation automatically doubled the external debt as expressed in the local currency. The State was forced to double the amount of revenues set aside for repayment of the external debt in foreign currencies. As a result, in 1932, Greece had to partially suspend repayment of the debt.

Once again, if we focus on Greece while isolating her from the international context, we are likely to wrongly interpret what has taken place, just as a great many commentators have done. Yet it needs to be kept in mind that in 1932 the UK, France, Belgium, Italy and other countries also decided to suspend repayment of war debts between themselves and the USA. Germany suspended repayment of its debt to private creditors starting in February 1932 and, in May 1933, announced suspension of payments to all creditors. Hungary, Latvia, Romania and Yugoslavia were also in suspension of payment. Not to mention fourteen Latin American countries. What is systematically ignored by the dominant media is the fact that even after the moratorium decreed by Greece in 1932, she continued to make debt repayments under the tutelage of the IFC.

The International Financial Commission’s effects 

The daily Le Monde, cited earlier, says about the IFC’s actions: “In spite of everything, the result is far from being negative: It assisted a young Greece in taking control over its tax revenues and limiting the misappropriation of foreign capital by the local elite. It also contributed to the establishment of reforms that were indispensable for the country’s modernisation.” How is it possible for someone to write such a thing? The IFC exercised a true, permanent diktat over Greece’s finances for the benefit of the creditors, which prevented Greece from defining a development project and kept the country under the yoke of structural subordination.
According to Meyer, Reinhart and Trebesch, the actual yield obtained by the holders of Greek securities purchased abroad and denominated in foreign currencies and which were in suspension of payment at one time or another is between +1% and +5%. That’s a pretty high yield for the government bonds of a country that has the reputation of being a poor payer! How can this positive yield be explained? The actual interest rates were high, the debt stock was not reduced and, despite the repeated periods of suspension of payment, the country most often continued the repayments. As a matter of fact, even during the Great Depression of the 1930s, Greece, even though officially in partial suspension of payment, devoted a third of her revenues to debt repayment, which corresponds to 9% of Greece’s GDP, while during the same period Romania and Bulgaria were devoting, respectively, 2.3% and 3% of their GDP to debt service.

Conclusions

The analysis conducted in this article is not aimed at exonerating Greece’s governments and dominant class of their responsibilities. Quite to the contrary, the decision made by the successive Greek governments and by the dominant class to cave in to the requirements of the creditors and the major powers had terrible consequences for the Greek people. The Greek capitalist class, who were specialists in the realm of finance and international trade, constituted a bourgeoisie that was largely deterritorialised and never had either a true national project nor the will to promote development based on a real industrial fabric. Due to this very fact, its interests were inextricably linked to the interest of the country’s creditors. At times it even constituted a large percentage of the totality of those creditors, which explains its complicity with the representatives of the creditor powers. This is a constant fact from the 19th century up to today.

During the period we have examined here, Greece has constantly been dominated by foreign European powers. Foreign debt has been a permanent weapon used to exercise that domination. Yet as we see, that debt was clearly illegitimate, odious, illegal and unsustainable.

We’ve also seen that the successive debt crises are very closely linked to the international context and that many other peripheral countries have been subjected to the same treatment. The analysis must therefore be pursued in other areas of the world and justice must be done for all peoples subjected to debt.

Bibliography for Part Two: 
- Beloyannis, Nikos, Foreign Capital in Greecehttp://iskra.gr/index.php?option=co…
- Truth Committee on the Greek Public Debt, Preliminary Report of the Truth Committee on Public Debt, Athens, 2015 http://cadtm.org/Preliminary-Report-of-the-Truth
- Delorme, Olivier. 2013. La Grèce et les Balkans, du Ve siècle à nos jours, 3 volumes, Gallimard, Paris, 2013
- Driault, Edouard and Lhéritier, Michel. 1926. Histoire diplomatique de la Grèce de 1821 à nos jours, 5 volumes, Presses universitaires de France (PUF), Paris, 1926.
- Levandis, John A. 1944. The Greek Foreign Debt and the Great Powers, 1821-1898, New York: Columbia University Press.
- Luxemburg, Rosa. 1913. The Accumulation of Capital, London, Routledge and Kegan Paul Ltd, 1951
- Mandel, Ernest. 1972. Late Capitalism, New Left Books, London 1975
- Mandel, Ernest. 1978. Long Waves of Capitalist Development, The Marxist Interpreta­tion, Based on the Marshall Lectures given at the University of Cambridge, Cambridge University Press and Editions de la Maison des Sciences de l’Homme, Paris, 141 p.
- Marichal, Carlos. 1989. A Century of Debt Crises in Latin America, Prince­ton, Princeton University Press, 283 p.
- Marx-Engels, La crise, col. 10/18, Union générale d’éditions, 1978, 444 p
- French Ministry of Foreign Affairs. Arrangement financier avec la Grèce : travaux de la Commission internationale chargée de la préparation du projet, Paris, 1898, 223 pages. http://gallica.bnf.fr/ark:/12148/bp…
- Pantelakis Nikos, “Crédits et rapports franco-helléniques 1917-1928”, in Actes du colloque tenu en novembre 1989 à Thessalonique, Institut d’histoire des conflits contemporains, Paris 1992
- Reinhardt, Carmen and Rogoff, Kenneth, This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press, 2011.
- Reinhardt, Carmen M., and Sbrancia, M. Belen. 2015 “The Liquidation of Government Debt” Economic Policy, no. 82: 291-333
- Reinhardt, Carmen and Trebesch, Christoph. 2015. The Pitfalls of External Dependence: Greece, 1829-2015
- Sack, Alexander Nahum. 1927. Les effets des transformations des États sur leurs dettes publiques et autres obligations financières, Recueil Sirey, Paris.
- Tsoucalas, Constantine. 1969. The Greek Tragedy, Penguin Books Ltd, Harmondsworth.

Translated by Snake Arbusto, Mike Kolikowski and Vicki Briault Manus

Acknowledgements: The author’s thanks for review and suggestions go to: Thanos Contargyris, Olivier Delorme, Pierre Gottiniaux, Jean-Marie Harribey, Daphne Kioussis, Damien Millet, Nikos Pantelakis, Claude Quémar, Patrick Saurin, Yannis Thanassekos, Eleni Tsekeri.

The author accepts full responsibility for any errors that may occur in this work.

Footnotes

|1| See the first part of this series for an analysis of Greek debts and the 1878 agreements, http://cadtm.org/Newly-Independent-Greece-had-an

|2http://www.lemonde.fr/economie/arti… (in French)

|3http://www.bilan.ch/argent-finances… (in French)

|4| In rhetoric, an oxymoron, from the Greek ὀξύμωρος (oxúmōros – de ὀξύς, “sharp, spiritual, witty” and from μωρός, “silly, stupid”, to signify “clever stupid”) is a stylistic device that brings together two terms (a noun and an adjective) of opposing signification in an apparently contradictory form, such as: a bright obscurity or a murky transparency.

|5| Amongst the classical authors, see on imperialism: Rudolf Hilferding (Finance Capital, 1910), Rosa Luxemburg (The Accumulation of Capital, 1913), Vladimir Lenin (Imperialism, the Highest Stage of Capitalism, 1916), Nicolai Bukharin (Imperialism and World Economy, 1915), Ernest Mandel (Late Capitalism, 1972), Samir Amin (Unequal Development: An Essay on the Social Formations of Peripheral Capitalism) New York: Monthly Review Press.

|6| See Carmen M. Reinhart and Christoph Trebesch: The Pitfalls of External Dependence: Greece, 1829-2015, p. 24. Greece received £1.3 million in 1824-1825; in 1878, she agreed to repay £1.2 million plus interest.

|7| See Louise Abellard, “L’Empire Ottoman face à une ‘Troika’ franco-anglo-allemande : retour sur une relation de dépendance par l’endettement” (The Ottoman Empire and the British-French-German Troika: an enquiry into debt dependency), 17 October 2013, (trans. CADTM) http://cadtm.org/L-Empire-Ottoman-face-a-une-troika(in French)

|8| See: http://cadtm.org/Newly-Independent-Greece-had-an

|9| See: http://cadtm.org/Newly-Independent-Greece-had-an

|10| See Marichal, Carlos. 1989. A Century of Debt Crises in Latin America, Princeton, Princeton University Press, 283 p. Chapter 6.

|11| See Carmen M. Reinhart and Christoph Trebesch: The Pitfalls of External Dependence: Greece, 1829-2015, p. 25.

|12| See Edouard Driault and Michel Lhéritier, Histoire diplomatique de la Grèce de 1821 à nos jours (The Diplomatic History of Greece from 1821 to Today) (in French), Presses universitaires de France (PUF), 1926, 5 tomes. The 56% figure is taken from Tome IV, p. 296. The description of the Greek situation is very interesting.

|13| Idem, Tome IV, p. 301.

|14| This thesis is well-argued by Edouard Driault and Michel Lhéritier, in Tome IV, p. 385 and following. The two authors tell a very detailed version of the conflict and its outcome. cf. chapter VII.

|15| See the peace treaty and numerous annexes (all in French): http://gallica.bnf.fr/ark:/12148/bp…

|16| TAIPED is the Greek acronym of the Hellenic Republic Asset Development Fund created by the Troika in 2010 to organize privatization. The funds thus garnered are to be used entirely for debt repayment.

|17Arrangement financier avec la Grèce, travaux de la Commission internationale chargée de la préparation du projet / French Ministry of Foreign Affairs – Paris, 1898, p. 33. (in French only).

|18| Translation: CADTM

|19| From the end of the 1890s Germany was Greece’s principal export partner.

|20| See Carmen M. Reinhart and Christoph Trebesch, The Pitfalls of External Dependence: Greece, 1829-2015, p. 15.

|21| See Table 9 from Carmen M. Reinhart and Christoph Trebesch, The Pitfalls of External Dependence: Greece, 1829-2015, p. 14

|22| Eugène-Melchior de Vogüé, “Livres Jaunes” in Le Figaro, 2 May 1898

|23| According to Driault and Lhéritier, whose conclusions are based on other serious work, the Greek securities issued in France were purchased almost exclusively by Greeks residing in France and not by the French. See Edouard Driault and Michel Lhéritier, Histoire diplomatique de la Grèce de 1821 à nos jours, Presses universitaires de France (PUF), 1926, tome IV, p. 304, note 1.

|24| All passages in italics are taken from: Constantine Tsoucalas, The Greek Tragedy, Penguin Books Ltd, Harmondsworth, 1969.

|25| This question of what is known as the “Asia Minor catastrophe” is still the subject of intense debate today, both in the public sphere and among historians who have deconstructed the official narrative.

|26| There is not space enough here for a critical analysis of the debts demanded of Greece by the Allied powers following the First World War, but the author feels that a large share of these debts may be considered illegitimate. For an introduction to the problem, see Nikos Pantelakis, “Crédits et rapports franco-helléniques 1917-1928” in Actes du colloque tenu en novembre 1989 à Thessalonique, Institut d’histoire des conflits contemporains, Paris 1992 (in French).

|27| The Gold Standard is a monetary system in which the unit of account or monetary standard corresponds to a fixed quantity of gold. Advocates of the Gold Standard feel that it improves resistance to the expansion of credit and of debt. Unlike a fiat currency, a currency backed by gold cannot be issued arbitrarily by a government. Beginning in 1929 and the start of the Great Depression, British gold reserves were reduced to the point where the liabilities of the Bank of England were well in excess of its gold reserves. In September 1931, it decided to suspend the external convertibility of the pound and allow it it float freely. Germany, Austria and Norway followed shortly after the decision. The United States withdrew from the system in 1933.

Author

94895e0e28aa2fe25dfe55787b762569Eric Toussaint is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France. He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc. See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.

 

Jul 192015
 

By Éric Toussaint, Rosa Moussaoui, CADTM, 99GetSmart

Éric Toussaint before the Greek Parliament on 17 June 2015, in the presence of Zoe Konstantopoulou, president of the Greek Parliament and several ministers

Éric Toussaint before the Greek Parliament on 17 June 2015, in the presence of Zoe Konstantopoulou, president of the Greek Parliament and several ministers

Éric Toussaint interviewed by Rosa Moussaoui, Special envoy in Athens for  L’Humanité

Has Athens really been subjected to a financial coup d’état over recent weeks as claimed by many Greek and foreign observers?

Éric Toussaint: Yes and no. What was decisive was the result of political decisions made by political institutions, though obviously complicit with financial interests. The coup d’état was not directly led by financial powers, but by institutions, the European Commission and the heads of State and Government of the Eurozone. Germany was not the only country involved. Mariano Rajoy in Spain, or Pedro Passos Coelho in Portugal, not to mention the Finnish, Latvian and other decidedly neoliberal governments clearly wanted to demonstrate to their respective populations that the options presented to the European peoples by the Syriza government were unworkable. So the primary motivation was political. Clearly though the private banking sector and the multinational corporations also wanted to show that it is impossible to turn away from austerity policies. However, it must be remembered that Greece’s principal creditors are public institutions; since 2012 when they managed to unload their Greek debt, private banks are not the most interested party. The debt restructuring that took place permitted them to comfortably withdraw. Today, despite the failure of the economic policies that have been imposed on Greece, the European Commission, the ECB and the Eurozone countries are adamant that Greece continues on the path of neoliberalism. Remember that the IMF is also a political institution.
Alexis Tsipras expected assurances for debt relief in return for his capitulation to the austerity policies. The creditors have merely acquiesced to a discussion scheduled for this year on a possible debt restructuring starting from 2022. Why this obstinacy, while the IMF itself now considers the debt as unsustainable?
Éric Toussaint: I think that a Debt Restructuring is feasible before 2022. The creditors will say “not before 2022” because they know that this plan will not work and that the debt payment will be unsustainable. They will restructure this debt provided the neoliberal reforms are pursued. Debt is a means of blackmail, an instrument of domination. Basically, in the Greek case, the creditors are not so much motivated by profit, pertinent as it is, as by teaching a lesson to their own people and the peoples of other peripheral countries that there is no question of deviating from the model. For Hollande to say, “Look, even Tsipras and the radical left cannot escape the economic stranglehold!” is a way of vindicating his own abdication in 2012 on the promise to renegotiate the European treaty on fiscal stability.

Did Tsipras have any other choice vis- à-vis the violent attacks from the creditors? Does the alternative boil down to an exit from the Euro?

Éric Toussaint: I don’t think so. The choice was not necessarily between Grexit and remaining in the Euro Zone equipped with a new austerity plan and continuing to pay the debt. It was possible to stay in the Euro Zone by disobeying the creditors through legal means. Human rights violations are at stake here. The Greek authorities should have suspended the debt payment; retrieved control over the Bank of Greece (Antonis Samaras appointed its CEO, who has not served the interests of the country); and created a complementary electronic currency that could have helped to cope with the liquidity crisis, whilst remaining within the Euro Zone.

The State should also have taken the following steps:
1. Organize an orderly liquidation of banks and transfer the assets to the public sector (guaranteeing deposits up to € 100,000) whilst ensuring the protection of small shareholders and recovering the cost of cleansing the banks from the wealth of major international shareholders.
2. Reduce VAT on goods and basic utility services; reduce direct taxes on low income and assets; and levy heavy taxes on the income and wealth of the richest 10% (particularly the richest 1%).
3. Stop privatization and reinforce public services.

After the Greek Parliament adopted the disastrous agreement of 13 July, the prospect of a voluntary exit from the Euro is obvious. That there is no favourable solution for the peoples within the Euro Zone is now evident to more and more Greek and other European people. In case of a voluntary exit from the Euro Zone, the above propositions remain fully valid and a redistributive monetary reform must accompany them (see Greece: Alternatives to the Capitulation).

The ECB, one of the masterminds of the coup, is flooding the financial markets with liquidity and boosting speculation. Can capital generation serve the real economy, social needs and human development?

Eric Toussaint: Of course but this not what the ECB has been doing! Mario Draghi is not “independent”. He is the interface between major private banks and the governments of the Euro Zone. The ECB has deliberately destabilized the Greek economy to suit its own as well as other creditors’ purpose.

Translation : Suchandra de Sarkar, Mike Krolikowski and Christine Pagnoulle

 

Eric Toussaint, Author

Eric Toussaint, Author

Eric Toussaint is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège. He is the President of CADTM Belgium, and sits on the Scientific Council of ATTAC France. He is the co-author, with Damien Millet of Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He is the author of many essays including one on Jacques de Groote entitled Procès d’un homme exemplaire (The Trial of an Exemplary Man), Al Dante, Marseille, 2013, and wrote with Damien Millet, AAA. Audit Annulation Autre politique (Audit, Abolition, Alternative Politics), Le Seuil, Paris, 2012. See his Series “Banks versus   the People: the Underside of a Rigged Game!” Next publication : Bankocracy Merlin Press, Londres, May 2015 (English version).

Since the 4th April 2015 he is coordinator of the Truth Commission on Public Debt.

 

Mar 142015
 

By J Iddhis Bing, 99GetSmart

Greek Prime Minister Tsipras at the Organization for Economic Cooperation and Development, Thursday, March 12, 2015. Photo by Iddhis Bing.

Greek Prime Minister Tsipras at the Organization for Economic Cooperation and Development, Thursday, March 12, 2015. Photo by Iddhis Bing.

 

Alex Tsipras and ministers of his government – among them, the Alternate Minister for International Economic Relations, Euclid Tsakalotos, and a certain Minister of Finance, name of Varoufakis – were in Paris on Thursday for a wide- ranging series of talks with the OECD (Organisation for Economic Co-operation and Development). After the discussions Tsipras gave a short press conference followed by a speech to OECD member nations and the press. The OECD announced a number of joint initiatives with the Greek government in areas such as job creation, public finance and spending, taxation and, intriguingly, “disrupting oligarchies and cartels.” The organization’s Secretary-General, Angel Gurria, was careful to note that “The OECD is not replacing any other institution that the government works with. We are involved because we were asked by one of our founding member countries to offer help and advice on their reform program.”

Regular readers here will pardon the pro-forma above. I snuck in the OECD’s side door and took notes. I looked pretty good, considering that my hands were covered with bloody scratches courtesy of a cat I met the day before. Events at places like the OECD in the opulent 16th are interesting theatre, at least the first time around. They are rigorously controlled affairs, so you have to lean in if you want to glimpse the human beast.

The Greeks need friends in Europe. They’re looking everywhere, and the trip to Paris can be seen as part of the continuing charm offensive. They need public statements of support and not quiet murmurs of assent such as François Hollande dispenses. (Not too loud, Angela might hear.) They have confidence in what looks like a lonely fight but they seem to be still hoping that the tide will turn, that Europe will join them in replacing the Austerity Drones. That’s one explanation for their presence. But it leaves a lot out.

… The plush little theatre where the press conference takes place is crammed with journalists. In the first two rows, a swirling crowd that speaks only Greek and is constantly hopping in and out of their seats, as if they were making policy decisions at the last second. The camera men are set up with their ridiculous foot-long lenses, the facilitators line the aisle, we’re all waiting. Do my co-workers expect anything new to be said? There’s no bar down here in the basement of the OECD – I haven’t found one anyway. Just fruit juice. It’s nice to be healthy but a drink helps when you have to listen to politicians for a few hours, and without a bar there’s no fraternity. Journalists these days are a quiet lot and far too many of them are staring at the portables on their laps like zombies getting the feed.

And then – swoosh. The doors open and one buzz replaces another as Tsipras and cohorts glide in. The photographers order anyone in their way to sit down. What jerks.

Tsipras and Gurria take the platform. Gurria grips the lecturn like he’s maybe going to pull it out of the floor and hurl it at us, or maybe a bit like a sea captain staring off into the mist on a stormy night. Tsipras’s body language is patient, deferential, waiting his cue. He’s willing to play the game. I wonder if he can understand a word Gurria is saying.

He’s a fast talker this Gurria. Six languages or so the official bio claims. Brooklyn is full of guys like him, always on the up and up, everything positive, always shaking people’s hands, aways trying to sell you something – an idea maybe. (People in Brooklyn have ideas.) They come at you fast on the sidewalk and it’s always too late to avoid them. They’re not so bad, it’s just that they’re always brimming. Well, Gurria has the right, he’s head of the OECD, unofficially known as the “world’s club for the richy-rich.” Readers with memories of old columns will recall that Luxembourg is a member too and that they simply choose to “exercise the privilege” of not signing the organization’s tax avoidance mandates, which they had every right to do. It’s called taking care of business properly.

So Gurria is finishing up, he says again and again that “Syriza has only been in power a few weeks,” and underlines that the OECD is not replacing any other organization at least twice. Who could that be refering to, I wonder? Greece will take help anywhere it can. As the poet Roque Dalton observed, “The drowning man doesn’t ask which way the boat is headed.”

Tspiras is not so nice. The Troika is his voodoo doll: if you bring it on stage, you have to stab it – at least twice. And he obliges. Syriza remains committed to its social program in all its aspects, he says, as well as the Memorandum of reform they signed in mid-February. But he stresses that it is reform their way and not what the Central Bank and the IMF think change looks like. Watch a few videos of the Euro group President Jeroen Tijsselbloem, read his body language as he says, “We are still waiting to see evidence of reform by the Greeks.” (My paraphrase.) The two parties are speaking different languages. In a video after Syriza’s election he talks about how much his organization helped Greece with interest delays and other bookkeeping sleights of hand (heroic acts). Tijsselbloem is a human in functionary drag, passenger on a boat going the wrong way. He is the kind of man who says “water” before he lifts the glass to his lips. It’s a policy statement.

Gurria smacks down a journalist who dares to ask a pointed question about Spain and deficits, and the journalist takes it. It’s a regular love-fest in here, Gurria seems to be saying. Let’s not let reality interrupt.

This “only been in power a few weeks” gets on my nerves. Who’s he saying it to? He sounds like he’s trying to convince a judge in some small Texas town that his client shouldn’t hang – right away anyway. He repeats it, staring over our heads into Nowhereland. Is he addressing it to Christine Lagarde at the IMF? Did they have a spat? “Look, Angel, hang with the Greek boys on Thursday. But don’t even dream about pal-ing around over the weekend. What if you give me the disease?”

If I were a professor of institutional semantics, I’d roll it out like this: the OECD is a parallel international organization that wields power behind the scenes. Corporations are always knocking on their door demanding special privileges and they (the OECD) hold sway within the different national bureaucracies, within the mindset. Greece needs breathing room and if the OECD isn’t offering cash, it’s access, which may be more valuable. Of course they’re “enterprise-oriented.” National salvation isn’t in their tool kit. It will be up to Syriza to resist. In any case, the OECD isn’t issuing diktats.

More interesting to speculate on Gurria’s motives. Why has he so forcefully interposed the OECD between Greece and the Troika? Clearly not “replacing any other organization,” but it’s as if that Brooklyn glad-hander stepped between the bully and his victim and yelled, “Hands Off!” Whose side is he on? Impossible to say. His face is a mask, he speaks in soundbites. (Is there a school for that?) Greece in any case will be able to say to Tijsselbloem et Co., “We’re playing by OECD rules. Good enough for you?” when that all-but-inevitable departure from the Euro threatens again. Greece is playing for time. Syriza has to both implement reforms and see some positive results. In four months. Pasok had ten years to shoot their wad and blow the treasury. I don’t remember the European fright wigs complaining then.

But what! – Hey!- What’s that noise! – breaking glass – in this soft little amphitheatre. Here? It can’t be. But it is. Reality is not so nice. Reality is the Syriza snarl. Here they are showing the OECD what attentive fellows they can be – but just a day before – a bit of mayhem before they arrived in Paris. They went before the world and accused Germany of the systemic pillage of their country.

In December 2014 the Greek finance ministry published a report which calculated that Germany “owed” Greece €9.2bn for the first world war, €322bn for the second and €10bn for money Greece was forced to lend the Nazi regime in 1942.

On Wednesday Alex Tsipras weighed in before the Greek Parliament. “After the reunification of Germany in 1990, the legal and political conditions were created for this issue to be resolved. But since then, German governments chose silence, legal tricks and delay.”

Now we get to the good part of the drama, when the upstart Southerners confront the Northern behemouth. They prick them where it hurts. The worst part of it, for the Germans, is that the Greeks are trying to steal their role, that of the Great Reproover, the Clean Liver, the Prosperous. You’re thieves, the Greeks bellow. And the Greeks were being nice about it. They didn’t even mention the gold bricks the Germans took with them at the end of the Second World War, a theft that William Pfaff, the dean of American foreign policy writing, calls “a legitimate issue.”

To their immense credit there are numerous Germans, individuals and political groups, who have stood up and publicly backed the Greeks in raising the issue.

No one can seriously believe that the Syriza-led government is naïve about what the OECD represents. At the same time the fly on the conference room wall knows more than we do about the OECD’s real strategy for Greece. OECD assistance may help to cauterize the wound; looked at another way it brings Greece closer to the business establishment.

There was more to the afternoon. Tspiras had yet to give his speech. His English is nearly incomprehensible and it got worse as the speech went on. He was saying something, it was the kind of speech the OECD likes to hear, full of initiatives and targets. He did say, “We don’t want to reform Greece, we want to transform it.” For that dream, he will meet obstacles on all sides, international and domestic, not least that part of the Greek left who have already decided he’s a sellout.

In the corridors close to the centers of power, where Power takes the shape of human figures gliding down a passageway surrounded by body guards, Sub-Ministers for various offices, journo-hangers-on desperate for a quote, everything is rumor, opinion, hand-held devices pumping out new info, distraction – buzz. Very little is really known and what is known can change instantly into its opposite. That’s what Syriza is banking on.

What’s the probability that the sea of hemmed-in, shoulder to shoulder journalists, administrators and facilitators would somehow part to allow an awkward young German reporter, tall and a little stiff like he was new on the beat, to step forward and block Varoufakis’s path? Not likely in that crowd – but it happened. He had a question. Not about reparations. “Is it true, Mr. Minister, that Greece will run out of money in seven days?” A short freeze in the crowd surge. Varoufakis gives him a quick look up and down. It’s provocation with a German accent. “Can’t Buy Me Love,” Varoufakis replies softly. “Good song. Do you know it?” The crowd moves on, out of the room.

The journalist looks verklempt, augestorben – overcome, lost. Varoufakis played him. That’s game theory: change the terms of the debate. The reporter hobbles back to his computer. He didn’t get his quote, or so he thinks. Humiliated, he looks around for help.

The OECD is an interesting faction of the elite to have on your side. They can’t say you don’t play by the rules, even if you have to bend them. Everybody does, just look at Luxembourg. But I think we are nearly at the end of the epoch when Greece can be regarded as a pariah. What happened there happened with the full knowledge of the EU, the ECB and the IMF, and therefore, one could argue, with their consent. The OECD plans, I suspect, to play the role of mediator, with or without the blessing of the Troika. So far Syriza has shown that it’s one step ahead of the functionaries of Reality As Such.

Feb 242015
 

By William Blum, 99GetSmart

The Greek Tragedy: Some things not to forget, which the new Greek leaders have not.

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American historian D.F. Fleming, writing of the post-World War II period in his eminent history of the Cold War, stated that “Greece was the first of the liberated states to be openly and forcibly compelled to accept the political system of the occupying Great Power. It was Churchill who acted first and Stalin who followed his example, in Bulgaria and then in Rumania, though with less bloodshed.”

The British intervened in Greece while World War II was still raging. His Majesty’s Army waged war against ELAS, the left-wing guerrillas who had played a major role in forcing the Nazi occupiers to flee. Shortly after the war ended, the United States joined the Brits in this great anti-communist crusade, intervening in what was now a civil war, taking the side of the neo-fascists against the Greek left. The neo-fascists won and instituted a highly brutal regime, for which the CIA created a suitably repressive internal security agency (KYP in Greek).

In 1964, the liberal George Papandreou came to power, but in April 1967 a military coup took place, just before elections which appeared certain to bring Papandreou back as prime minister. The coup had been a joint effort of the Royal Court, the Greek military, the KYP, the CIA, and the American military stationed in Greece, and was followed immediately by the traditional martial law, censorship, arrests, beatings, and killings, the victims totaling some 8,000 in the first month. This was accompanied by the equally traditional declaration that this was all being done to save the nation from a “communist takeover”. Torture, inflicted in the most gruesome of ways, often with equipment supplied by the United States, became routine.

George Papandreou was not any kind of radical. He was a liberal anti-communist type. But his son Andreas, the heir-apparent, while only a little to the left of his father, had not disguised his wish to take Greece out of the Cold War, and had questioned remaining in NATO, or at least as a satellite of the United States.

Andreas Papandreou was arrested at the time of the coup and held in prison for eight months. Shortly after his release, he and his wife Margaret visited the American ambassador, Phillips Talbot, in Athens. Papandreou later related the following:

I asked Talbot whether America could have intervened the night of the coup, to prevent the death of democracy in Greece. He denied that they could have done anything about it. Then Margaret asked a critical question: What if the coup had been a Communist or a Leftist coup? Talbot answered without hesitation. Then, of course, they would have intervened, and they would have crushed the coup. 1

Another charming chapter in US-Greek relations occurred in 2001, when Goldman Sachs, the Wall Street Goliath Lowlife, secretly helped Greece keep billions of dollars of debt off their balance sheet through the use of complex financial instruments like credit default swaps. This allowed Greece to meet the baseline requirements to enter the Eurozone in the first place. But it also helped create a debt bubble that would later explode and bring about the current economic crisis that’s drowning the entire continent. Goldman Sachs, however, using its insider knowledge of its Greek client, protected itself from this debt bubble by betting against Greek bonds, expecting that they would eventually fail. 2

Will the United States, Germany, the rest of the European Union, the European Central Bank, and the International Monetary Fund – collectively constituting the International Mafia – allow the new Greek leaders of the Syriza party to dictate the conditions of Greece’s rescue and salvation? The answer at the moment is a decided “No”. The fact that Syriza leaders, for some time, have made no secret of their affinity for Russia is reason enough to seal their fate. They should have known how the Cold War works.

I believe Syriza is sincere, and I’m rooting for them, but they may have overestimated their own strength, while forgetting how the Mafia came to occupy its position; it didn’t derive from a lot of compromise with left-wing upstarts. Greece may have no choice, eventually, but to default on its debts and leave the Eurozone. The hunger and unemployment of the Greek people may leave them no alternative.

The Twilight Zone of the US State Department

“You are traveling through another dimension, a dimension not only of sight and sound but of mind. A journey into a wondrous land whose boundaries are that of imagination. Your next stop … the Twilight Zone.” (American Television series, 1959-1965)

State Department Daily Press Briefing, February 13, 2015. Department Spokesperson Jen Psaki, questioned by Matthew Lee of The Associated Press. 3

Lee: President Maduro [of Venezuela] last night went on the air and said that they had arrested multiple people who were allegedly behind a coup that was backed by the United States. What is your response?

Psaki: These latest accusations, like all previous such accusations, are ludicrous. As a matter of longstanding policy, the United States does not support political transitions by non-constitutional means. Political transitions must be democratic, constitutional, peaceful, and legal. We have seen many times that the Venezuelan Government tries to distract from its own actions by blaming the United States or other members of the international community for events inside Venezuela. These efforts reflect a lack of seriousness on the part of the Venezuelan Government to deal with the grave situation it faces.

Lee: Sorry. The US has – whoa, whoa, whoa – the US has a longstanding practice of not promoting – What did you say? How longstanding is that? I would – in particular in South and Latin America, that is not a longstanding practice.

Psaki: Well, my point here, Matt, without getting into history –

Lee: Not in this case.

Psaki: – is that we do not support, we have no involvement with, and these are ludicrous accusations.

Lee: In this specific case.

Psaki: Correct.

Lee: But if you go back not that long ago, during your lifetime, even – (laughter)

Psaki: The last 21 years. (Laughter.)

Lee: Well done. Touché. But I mean, does “longstanding” mean 10 years in this case? I mean, what is –

Psaki: Matt, my intention was to speak to the specific reports.

Lee: I understand, but you said it’s a longstanding US practice, and I’m not so sure – it depends on what your definition of “longstanding” is.

Psaki: We will – okay.

Lee: Recently in Kyiv, whatever we say about Ukraine, whatever, the change of government at the beginning of last year was unconstitutional, and you supported it. The constitution was –

Psaki: That is also ludicrous, I would say.

Lee: – not observed.

Psaki: That is not accurate, nor is it with the history of the facts that happened at the time.

Lee: The history of the facts. How was it constitutional?

Psaki: Well, I don’t think I need to go through the history here, but since you gave me the opportunity –- as you know, the former leader of Ukraine left of his own accord.

………………..

Leaving the Twilight Zone … The former Ukrainian leader ran for his life from those who had staged the coup, including a mob of vicious US-supported neo-Nazis.

If you know how to contact Ms. Psaki, tell her to have a look at my list of more than 50 governments the United States has attempted to overthrow since the end of the Second World War. None of the attempts were democratic, constitutional, peaceful, or legal; well, a few were non-violent. 4

The ideology of the American media is that it believes that it doesn’t have any ideology

So NBC’s evening news anchor, Brian Williams, has been caught telling untruths about various events in recent years. What could be worse for a reporter? How about not knowing what’s going on in the world? In your own country? At your own employer? As a case in point I give you Williams’ rival, Scott Pelley, evening news anchor at CBS.

In August 2002, Iraqi Deputy Prime Minister Tariq Aziz told American newscaster Dan Rather on CBS: “We do not possess any nuclear or biological or chemical weapons.” 5

In December, Aziz stated to Ted Koppel on ABC: “The fact is that we don’t have weapons of mass destruction. We don’t have chemical, biological, or nuclear weaponry.” 6

Iraqi leader Saddam Hussein himself told CBS’s Rather in February 2003: “These missiles have been destroyed. There are no missiles that are contrary to the prescription of the United Nations [as to range] in Iraq. They are no longer there.” 7

Moreover, Gen. Hussein Kamel, former head of Iraq’s secret weapons program, and a son-in-law of Saddam Hussein, told the UN in 1995 that Iraq had destroyed its banned missiles and chemical and biological weapons soon after the Persian Gulf War of 1991. 8

There are yet other examples of Iraqi officials telling the world, before the 2003 American invasion, that the WMD were non-existent.

Enter Scott Pelley. In January 2008, as a CBS reporter, Pelley interviewed FBI agent George Piro, who had interviewed Saddam Hussein before he was executed:

PELLEY: And what did he tell you about how his weapons of mass destruction had been destroyed?

PIRO: He told me that most of the WMD had been destroyed by the U.N. inspectors in the ’90s, and those that hadn’t been destroyed by the inspectors were unilaterally destroyed by Iraq.

PELLEY: He had ordered them destroyed?

PIRO: Yes.

PELLEY: So why keep the secret? Why put your nation at risk? Why put your own life at risk to maintain this charade? 9

For a journalist there might actually be something as bad as not knowing what’s going on in his area of news coverage, even on his own station. After Brian Williams’ fall from grace, his former boss at NBC, Bob Wright, defended Williams by pointing to his favorable coverage of the military, saying: “He has been the strongest supporter of the military of any of the news players. He never comes back with negative stories, he wouldn’t question if we’re spending too much.” 10

I think it’s safe to say that members of the American mainstream media are not embarrassed by such a “compliment”.

In his acceptance speech for the 2005 Nobel Prize for Literature, Harold Pinter made the following observation:

Everyone knows what happened in the Soviet Union and throughout Eastern Europe during the post-war period: the systematic brutality, the widespread atrocities, the ruthless suppression of independent thought. All this has been fully documented and verified.

But my contention here is that the US crimes in the same period have only been superficially recorded, let alone documented, let alone acknowledged, let alone recognized as crimes at all.

It never happened. Nothing ever happened. Even while it was happening it wasn’t happening. It didn’t matter. It was of no interest. The crimes of the United States have been systematic, constant, vicious, remorseless, but very few people have actually talked about them. You have to hand it to America. It has exercised a quite clinical manipulation of power worldwide while masquerading as a force for universal good. It’s a brilliant, even witty, highly successful act of hypnosis.

Cuba made simple

“The trade embargo can be fully lifted only through legislation – unless Cuba forms a democracy, in which case the president can lift it.” 11

Aha! So that’s the problem, according to a Washington Post columnist – Cuba is not a democracy! That would explain why the United States does not maintain an embargo against Saudi Arabia, Honduras, Guatemala, Egypt and other distinguished pillars of freedom. The mainstream media routinely refer to Cuba as a dictatorship. Why is it not uncommon even for people on the left to do the same? I think that many of the latter do so in the belief that to say otherwise runs the risk of not being taken seriously, largely a vestige of the Cold War when Communists all over the world were ridiculed for blindly following Moscow’s party line. But what does Cuba do or lack that makes it a dictatorship?

No “free press”? Apart from the question of how free Western media is, if that’s to be the standard, what would happen if Cuba announced that from now on anyone in the country could own any kind of media? How long would it be before CIA money – secret and unlimited CIA money financing all kinds of fronts in Cuba – would own or control almost all the media worth owning or controlling?

Is it “free elections” that Cuba lacks? They regularly have elections at municipal, regional and national levels. (They do not have direct election of the president, but neither do Germany or the United Kingdom and many other countries). Money plays virtually no role in these elections; neither does party politics, including the Communist Party, since candidates run as individuals. Again, what is the standard by which Cuban elections are to be judged? Is it that they don’t have the Koch Brothers to pour in a billion dollars? Most Americans, if they gave it any thought, might find it difficult to even imagine what a free and democratic election, without great concentrations of corporate money, would look like, or how it would operate. Would Ralph Nader finally be able to get on all 50 state ballots, take part in national television debates, and be able to match the two monopoly parties in media advertising? If that were the case, I think he’d probably win; which is why it’s not the case.

Or perhaps what Cuba lacks is our marvelous “electoral college” system, where the presidential candidate with the most votes is not necessarily the winner. If we really think this system is a good example of democracy why don’t we use it for local and state elections as well?

Is Cuba not a democracy because it arrests dissidents? Many thousands of anti-war and other protesters have been arrested in the United States in recent years, as in every period in American history. During the Occupy Movement two years ago more than 7,000 people were arrested, many beaten by police and mistreated while in custody. 12   And remember: The United States is to the Cuban government like al Qaeda is to Washington, only much more powerful and much closer; virtually without exception, Cuban dissidents have been financed by and aided in other ways by the United States.

Would Washington ignore a group of Americans receiving funds from al Qaeda and engaging in repeated meetings with known members of that organization? In recent years the United States has arrested a great many people in the US and abroad solely on the basis of alleged ties to al Qaeda, with a lot less evidence to go by than Cuba has had with its dissidents’ ties to the United States. Virtually all of Cuba’s “political prisoners” are such dissidents. While others may call Cuba’s security policies dictatorship, I call it self-defense.

The Ministry of Propaganda has a new Commissar

Last month Andrew Lack became chief executive of the Broadcasting Board of Governors, which oversees US government-supported international news media such as Voice of America, Radio Free Europe/Radio Liberty, the Middle East Broadcasting Networks and Radio Free Asia. In a New York Times interview, Mr. Lack was moved to allow the following to escape his mouth: “We are facing a number of challenges from entities like Russia Today which is out there pushing a point of view, the Islamic State in the Middle East and groups like Boko Haram.” 13

So … this former president of NBC News conflates Russia Today (RT) with the two most despicable groups of “human beings” on the planet. Do mainstream media executives sometimes wonder why so many of their audience has drifted to alternative media, like, for example, RT?

Those of you who have not yet discovered RT, I suggest you go to RT.com to see whether it’s available in your city. And there are no commercials.

It should be noted that the Times interviewer, Ron Nixon, expressed no surprise at Lack’s remark.

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Notes

  1. William Blum, Killing Hope: U.S. Military and C.I.A. Interventions Since World War II, chapters 3 and 35
  2. Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt”, Spiegel Online (Germany), February 8, 2010. Google “Goldman Sachs” Greecefor other references.
  3. U.S. Department of State Daily Press Briefing, February 13, 2015
  4. Overthrowing other people’s governments: The Master List
  5. CBS Evening News, August 20, 2002
  6. ABC Nightline, December 4, 2002
  7. “60 Minutes II”, February 26, 2003
  8. Washington Post, March 1, 2003
  9. “60 Minutes”, January 27, 2008
  10. Democracy Now!, February 12, 2015, Wright statement made February 10
  11. Al Kamen, Washington Post, February 18, 2015
  12. Huffington Post, May 3, 2012
  13. New York Times, January 21, 2015
Mar 082014
 

Posted by SnakeArbusto, 99GetSmart

Source: CADTM Europe

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The CADTM affirms its full and complete solidarity with the people of Cyprus and their organisations struggling against privatizations in the energy, telecoms, and shipping sectors – privatizations required by the Memorandum imposed by the Troika in March 2013. Cyprus is the fourth country to be placed under the budgetary supervision of the European Union, after Greece, Ireland and Portugal.

In the face of the demonstrations of 27 February (a 3-day renewable strike by Electricity Authority of Cyprus workers and a strike by longshoremen at the ports of Limassol and Larnaca), the Parliament was unable to reach a majority to adopt the initial bill (25 votes for, 25 against, 5 abstentions; a majority of 29 is required for adoption). The following day the government handed in its resignation. The media, in total complicity with the Troika, have observed total silence over this situation – an extraordinary one, to say the least.

Despite the refusal expressed by the population in the streets, the Cypriot legislators have just adopted (4 March), by a vote of 30 to 26, a bill that is only a slightly modified version of the one they had themselves rejected the preceding week and which would result in the privatisation of the major public services: EAC (electricity), CYTA (telecoms), and CPA (the port authority). This new version of the law claims to guarantee the jobs of the employees of these companies, but no one actually believes that.

Adoption of the law was a condition for the granting of a new 236-million € tranche of the 10-Bn € loan granted by the Troika in March 2013.

The causes of the crisis in Cyprus have been clearly identified: 

1) A hypertrophied banking system
 that was completely out of control. The banks, who have considerable liquid assets provided by the “financial markets,” have recklessly made risky investments.

In 2012, Cyprus’s banks speculated on the restructuring of the Greek debt – 40% of their external commitments, which cost them 4.5 Bn €, or the equivalent of a quarter of Cyprus’s GDP, and brought on the collapse of this overinflated sector (whose assets represent seven times the country’s GDP).

These private losses were then promptly transformed into public debt. These debts are totally illegitimate and must be abolished, along with those stemming from the assistance plan!

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In 2009 and 2010, Cyprus’s public debt was only 52.4% and 60.8% of GDP, whereas in the Euro zone as a whole it was 80% of GDP in 2010.

In Germany, the percentage was 74.5% in 2009 and 82.5% in 2010.

2) A tax situation that is highly advantageous for companies: Corporate tax, which until the Memorandum was at an official rate of 10%, has only been raised to 12.5% (not enough to resolve the budget deficit).

To obtain the 10-Bn € assistance plan from the Troika (9 Bn € from the ECB and 1 Bn € from the IMF), Cyprus’s government also agreed to the restructuring of its banking system, a 10% reduction in public expenditures, and the privatization of the island’s main public sectors.

The IMF, represented in Cyprus by a former executive of Lehman Brothers, itself recognizes the economic ineffectualness of such measures. The IMF’s goal is not to provide support for the population of Cyprus, but to protect and guarantee the interests of the creditors! That is why the agents of the IMF must be run out of Cyprus, along with the representatives of the European Commission and the ECB!

Aside from the obvious risk of growth in unemployment (forecast to reach 19.4% in 2014), Cypriots fear skyrocketing prices, with wages and pensions already reduced by 20% in one year. The people’s mobilisation, practically uninterrupted for months, goes well beyond the industry sectors that are directly concerned.

Rubbish bins brought by the population are piled up in front of bank branches. There are regular interruptions of electrical power and the people are besieging the Parliament and official buildings. All sectors, both private and public, are present around the Parliament, demonstrating their opposition to the Troika’s structural adjustment plan.

The CADTM considers:

  • that the entire debt of Cyprus to the Troika is illegitimate and odious, and must be abolished in its entirety;
  • that the austerity plan imposed by the Troika must be revoked.

The population does not want to pay for the speculators and the wealthiest 1%. International solidarity must organise as soon as possible in support of this exemplary struggle. The CADTM will do all it can.

Translation by Snake Arbusto

Photo : CC – Eu Council Eurozone
Discussion before the meeting begins : Christine LAGARDE, IMF ; Thomas WIESER, President of the EFC (Economic and Financial Committee) and Michael SARRIS, Finances Minister of Cyprus (on the right).

Nov 142013
 

By J. Iddhis Bing, 99GetSmart

Greeks protest austerity cuts in Syntagma Square, Athens. Photography by Elias Theodoropoulos

Greeks protest austerity cuts in Syntagma Square, Athens. Photography by Elias Theodoropoulos

It’s hard work getting the news from the news these days, especially if you want to know about a country like Greece. Far-away birthplace of democracy, a bit exotic, Mediterranean lifestyle, Zorba, rumored to be different. What does any of that mean? Strange things are happening there but what is going on precisely? The Greeks ran up quite a tab at the bar, or so the financial dailies tell us on a regular basis.

Almost everything we read is filtered through the point of view of the Troika – the IMF, the European Central Bank and the European Commission – or the Greek government. We know that representatives of the Troika – established during the first stage of Greece’s “rescue” in May 2010 – have been in Greece since Tuesday of last week, meeting with the Greek government about the latest round of potential bailouts for that country. Beyond the leaks from either side, the rest, for us at any rate, is guesswork.

As of Tuesday evening, November 12, no decision had been announced. The Troika is typically very business-like with its clients, out with the whip, sign here, see you later – and then the next round of what the press like to call “belt-tightening” begins. The coalition government survived a no-confidence vote on Monday the 11th but that hardly quelled the sense that they are a very fragile edifice indeed. The people are out in the streets on a constant basis. They’re an after-thought, at least as far as the world’s media is concerned.

We do know a few things: that the Troika is a quasi-legal junta, created during the first stage of Greece’s trauma. The IMF was invited to the party at the insistence of Angela Merkel. Readers with long memories may remember that Dominique Strauss-Kahn was on his way to meet Merkel to present his plan to “save Greece,” when he was abruptly detained in New York.

The Troika’s mission is to enforce an austerity program that includes the selling-off of government assets and the decimation of public services, and that even within the IMF, there is dissension over the absurd goal of turning Greece into a productive satellite of Germany. We also know or suspect that any “bailout” of Greece will only impoverish the country yet further. That’s the public record regarding employment, savings, pensions, access to housing and food. You can read it here on Ground Report and find it many other places as well.

Language, meanwhile, gets so knocked around by the pros it throws its hands up in despair. Defeat comes at the price of rational thought: being rescued by the Troika means becoming a pauper in your own country, means your pension has vanished, you are a month or so away from losing the roof over your head and your hand is in the garbage looking for food.

None of the rescues perpetrated by the Troika have successfully rescued their target countries but instead have pitched them ever further into chaos. Bailouts are not a transfusion of money but a way of channeling money from one country (Germany, in this case) to another country (Greece) where the money is then re-routed to banks in, among other places, Germany and France in the form of debt payments.

The conservative government of Prime Minister Antonis Samaras, along with his coalition partner, Socialist Evangelos Venizelos, is said to be desperate not to tamper with what they consider Greece’s “success story,” one which includes massive unemployment and at least 20 percent of the population dependent on soup kitchens for the next meal. His figure is 700 million Euros to meet the debt payment schedule. The Troika is said to be looking for 2.9 billion Euros in savings from the current budget.

That explains the lack of an agreement since last Tuesday at least in part. The Troika is being held hostage. Round One to Greece.

Spectacularly, no one in the government mentions the list of 2,062 Greeks who are holding at least $1.95 billion in secret Swiss bank accounts. A list the government has had in its possession for at least three years without a single prosecution. (Interested readers can learn more here.) Articles in the local press do muse a bit about “tax collection” being a bit in arrears but without much enthusiasm.

Rumblings, such as they are, continue to be at such a low volume they can be hard to hear. Internal documents leaked from the IMF last week reveal that as early as May 2010, more than 40 IMF member states, all outside Europe, were opposed to the aid plan drawn up for Athens. (This in a report from last week’s Wall Street Journal.) The Troika itself is said to be headed for divorce. “The ECB must refrain from intervening in highly political decisions with its advice on taxes or cuts in spending. And yet that is just what it has been doing inside the troika. It must get out of it as soon as possible,” says Paul De Grauwe, a professor at the London School of Economics. In June of this year, a high official at the IMF publicly disagreed with the Troika’s agenda in Greece.

Even the pro-government publication Ekathimerini paints a decidedly gloomy picture: “Unfortunately, what this means in practical terms is that the current political system is not in a position to lead the country any further in terms of reforms. It doesn’t truly believe in these reforms and it does not have the stamina to clash with its traditional clientele,” writes Alexis Papachelas on November 10. Not exactly a ringing endorsement from a pro-government journo.

In other words: it isn’t working, it isn’t working at all, and yet our bedazzled technocrats continue to insist that it does, even if they don’t particularly believe it either. It’s the way the world does its “business.” Consider this: the Financial Times reported last weekend that Stephen King, chief economist at HSBC, “discovered” that nearly all of his bank’s country forecasts stated that the country-in-question planned to export its way to growth. (Ah, growth, endless growth. The Holy Grail, the never-ending rainbow at the end of the road. Line it up next to the other sacred cows, bailouts and rescues, and fire away.) Where they will all export to is the question, with every other country on earth frantically exporting its way to prosperity. Mars and Venus are at the head of the list, and why not? (William Pfaff has more on this.)

Greece lost some 35,000 jobs in October. So much for that success story. My sense is that the Troika’s technocrats simply live too high up in the stratosphere – somewhere near their very own cloud 9 – to be concerned with anything so gritty as jobs or hunger or survival. For them “the people” are an abstraction on the order of heroic rescues and bailouts.

The Washington Consensus is dead. Long Live the Consensus! The world, meanwhile, hangs by a thread. No one believes, fewer and fewer people vote and countries like Greece twist in the wind. Who reaps the advantage? The far right, the angry ones, the xenophobes who see us lined against each other in a global race to the End of the Line. One wonders exactly when Angela Merkel and that ardent enemy of finance François Hollande will get the message. (Before or after the rainbow? Place your bets here.)

The Troika, intent on getting in and out of Greece quickly with as few questions asked as possible, seem to have gotten stuck in transit. On Tuesday night, they were so afraid of angry cleaning ladies demonstrating in front of the Finance Ministry that they crawled on hands and knees out the building’s fire-escape to an underground garage en route to their own private cloud. That might not be, to employ yet another word that’s taken a few body blows, progress, but if a modern-day Aristophanes was anywhere nearby, he can make use of it.

As of Wednesday morning, November 13, no agreement between Greece and the IMF was in sight.When there is one, we’ll take a close look at it to see if there are any changes to the formula that has had such devastating consequences for Greece.

Nov 132013
 

Posted by greydogg, 99GetSmart

* IT’S BUSINESS THAT REALLY RULES US NOW

Lobbying is the least of it: corporate interests have captured the entire democratic process. No wonder so many have given up on politics

By George Monbiot, The Guardian

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It’s the reason for the collapse of democratic choice. It’s the source of our growing disillusionment with politics. It’s the great unmentionable. Corporate power. The media will scarcely whisper its name. It is howlingly absent from parliamentary debates. Until we name it and confront it, politics is a waste of time.

The political role of business corporations is generally interpreted as that of lobbyists, seeking to influence government policy. In reality they belong on the inside. They are part of the nexus of power that creates policy. They face no significant resistance, from either government or opposition, as their interests have now been woven into the fabric of all three main political parties in Britain.

Most of the scandals that leave people in despair about politics arise from this source. On Monday, for instance, the Guardian revealed that the government’s subsidy system for gas-burning power stations is being designed by an executive from the Dublin-based company ESB International, who has been seconded into the Department of Energy. What does ESB do? Oh, it builds gas-burning power stations.

On the same day we learned that a government minister, Nick Boles, has privately assured the gambling company Ladbrokes that it needn’t worry about attempts by local authorities to stop the spread of betting shops. His new law will prevent councils from taking action. […]

READ @ http://www.theguardian.com/commentisfree/2013/nov/11/business-rules-lobbying-corporate-interests?CMP=fb_gu

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* BANKOCRACY: FROM THE VENETIAN REPUBLIC TO MARIO DRAGHI AND GOLDMAN SACHS

By Eric Toussaint, CADTM

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From the 12th century to the beginning of the 14th, the Knights Templar, present in much of Europe, had become the bankers for the powerful and had taken part in the financing of several crusades. At the beginning of the 14th century, they were the main creditors of the King of France, Philip the Fair. Faced with a debt burden that was straining his resources, Philip the Fair eliminated both his creditors and his debt by demonising the Knights Templar, accusing them of many crimes |1|. Their Order was outlawed, the leaders executed and its assets seized. Its army (fifteen thousand men, including one thousand five hundred knights), its patrimony and its credits to rulers failed to protect it from the power of a State set on eliminating its main creditor.

During the same era (11th – 14th centuries) Venetian bankers were also financing the Crusades and lending money to the powerful of Europe, but they manoeuvred much more deftly than the Knights Templar. In Venice, they took control of the State by founding the Venetian Republic. They financed the transformation of the Venetian city-state into a veritable empire including Cyprus, Euboea (Negroponte) and Crete. They made use of a clever strategy to gain lasting wealth and guarantee reimbursement of their credits: they decided to drive the Venetian state into debt towards the banks they owned. They were the ones who set the terms of the loan contracts, as they were at once bank owners and rulers of the State.

While Philip the Fair had an interest in physically ridding himself of his creditors to be free from the debt burden, the Venetian State reimbursed the debt to bankers in cash. The latter came up with the idea of creating public debt titles that could circulate between banks. This was a step towards the establishment of financial markets |2|. This type of loan is the precursor to the major form of State debt as we know it in the 21st century.

Today, seven centuries after Philip the Fair crushed the Knights Templar, the bankers of Europe, just like their Venetian or Genovese forebears, clearly have nothing to fear from governments. […]

READ @ http://cadtm.org/Nouvelle-traduction-Bancocratie-de

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* PONZI AUSTERITY: A DEFINITION AND AN EXAMPLE

By Yanis Varoufakis, yanisvaroufakis.eu

austerity-george-osborne-desktop

For a while now I have been arguing that Europe’s policies for reducing the public debts of fiscally stressed member-states can be described as a Ponzi austerity scheme. In this post I attempt precisely to define ‘Ponzi austerity’.

Ponzi growth

Standard Ponzi schemes are based on a sleight of hand that creates the appearance of a fund whose value grows faster than the value that has come into it. In reality the opposite is true, as the scheme’s operator usually helps himself to some of the incoming capital while the scheme is not managing to create new capital with which to replenish these ‘leakages’, let alone pay the returns it promises. The appearances of growth that does not really exist is, of course, the lure that brings into the scheme new participants whose capital is utilised by the Ponzi scheme’s operator to maintain the facade of genuine growth.

Ponzi austerity

Ponzi austerity is the inverse of Ponzi growth. Whereas in standard Ponzi (growth) schemes the lure is the promise of a growing fund, in the case of Ponzi austerity the attraction to bankrupted participants is the promise of reducing their debt, so as to liberate them from insolvency, through a combination of ‘belt tightening’, austerity measures and new loans that provide the bankrupt with necessary funds for repaying maturing debts (e.g. bonds). As it is impossible to escape insolvency in this manner, Ponzi austerity schemes, just like Ponzi growth schemes, necessitate a constant influx of new capital to support the illusion that bankruptcy has been averted. But to attract this capital, the Ponzi austerity’s operators must do their utmost to maintain the façade of genuine debt reduction.

Ponzi austerity’s inventor: The Eurozone’s great and good

Ponzi growth has been around for yonks. But it took the collective wisdom of Europe’s great and good to create the first Ponzi austerity scheme. The Greek, Portuguese, Irish, Spanish and Cypriot loan agreements were the first ever examples of such a scheme. Bankrupted states, in a death embrace with bankrupted banking sectors, were forced to take in ever-increasing capital inflows (from the IMF, from the ECB, from the EFSF-ESM, shortly under the ECB’s OMT threat) on condition of belt-tightening austerity. As the scheme progresses, more capital is coming into it, debt-to-GDP ratios actually grow (just as in Ponzi growth schemes the value of the total fund is depleted) and, therefore, even more outside capital has to be brought in in order to maintain the pretense. […]

READ @ http://yanisvaroufakis.eu/2013/11/08/ponzi-austerity-a-definition-and-an-example/

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* A FULL-FRONTAL ASSAULT ON DEMOCRACY IN EUROPE AND THE UNITED STATES

We are in the dark about treaty that would let rapacious companies subvert our laws, rights and national sovereignty.

By George Monbiot, The Guardian

transatlantic-corporate-bill-of-rights-300x140

Remember that referendum about whether we should create a single market with the United States? You know, the one that asked whether corporations should have the power to strike down our laws? No, I don’t either. Mind you, I spent 10 minutes looking for my watch the other day before I realised I was wearing it. Forgetting about the referendum is another sign of ageing. Because there must have been one, mustn’t there? After all that agonising over whether or not we should stay in the European Union, the government wouldn’t cede our sovereignty to some shadowy, undemocratic body without consulting us. Would it?

The purpose of the Transatlantic Trade and Investment Partnership is to remove the regulatory differences between the US and European nations. I mentioned it a couple of weeks ago. But I left out the most important issue: the remarkable ability it would grant big business to sue the living daylights out of governments which try to defend their citizens. It would allow a secretive panel of corporate lawyers to overrule the will of parliament and destroy our legal protections. Yet the defenders of our sovereignty say nothing.

The mechanism through which this is achieved is known as investor-state dispute settlement. It’s already being used in many parts of the world to kill regulations protecting people and the living planet. […]

READ @ http://www.alternet.org/civil-liberties/full-frontal-assault-democracy-europe-and-united-states?paging=off&current_page=1#bookmark

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* ENOUGHNESS: RESTORING BALANCE TO THE ECONOMY

Source: firstpeoples

How we see the world determines how we act. Western thought sees us at war with each other over resources. Indigenous philosophy, we are all related as individuals in balance with nature. Watch ENOUGHNESS: Resorting Balance to the Economy and learn more at www.FirstPeoples.org. Share on Facebook and Twitter using #ENOUGHNESS.

VIDEO @ https://www.youtube.com/watch?v=RxPVrr44KHI

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* HOW ECONOMIC GROWTH HAS BECOME ANTI-LIFE

An obsession with growth has eclipsed our concern for sustainability, justice and human dignity. But people are not disposable – the value of life lies outside economic development

By Vandana Shiva, CommonDreams

'Water extracted beyond nature’s capacity to renew and recharge creates a water famine'. (Photograph: Joe McNally/Getty)

‘Water extracted beyond nature’s capacity to renew and recharge creates a water famine’. (Photograph: Joe McNally/Getty)

Limitless growth is the fantasy of economists, businesses and politicians. It is seen as a measure of progress. As a result, gross domestic product (GDP), which is supposed to measure the wealth of nations, has emerged as both the most powerful number and dominant concept in our times. However, economic growth hides the poverty it creates through the destruction of nature, which in turn leads to communities lacking the capacity to provide for themselves.

The concept of growth was put forward as a measure to mobilise resources during the second world war. GDP is based on creating an artificial and fictitious boundary, assuming that if you produce what you consume, you do not produce. In effect , “growth” measures the conversion of nature into cash, and commons into commodities.

Thus nature’s amazing cycles of renewal of water and nutrients are defined into nonproduction. The peasants of the world,who provide 72% of the food, do not produce; women who farm or do most of the housework do not fit this paradigm of growth either. A living forest does not contribute to growth, but when trees are cut down and sold as timber, we have growth. Healthy societies and communities do not contribute to growth, but disease creates growth through, for example, the sale of patented medicine.

Water available as a commons shared freely and protected by all provides for all. However, it does not create growth. But when Coca-Cola sets up a plant, mines the water and fills plastic bottles with it, the economy grows. But this growth is based on creating poverty – both for nature and local communities. Water extracted beyond nature’s capacity to renew and recharge creates a water famine. Women are forced to walk longer distances looking for drinking water. In the village of Plachimada in Kerala, when the walk for water became 10 kms, local tribal woman Mayilamma said enough is enough. We cannot walk further; the Coca-Cola plant must shut down. The movement that the women started eventually led to the closure of the plant.

In the same vein, evolution has gifted us the seed. Farmers have selected, bred, and diversified it – it is the basis of food production. A seed that renews itself and multiplies produces seeds for the next season, as well as food. However, farmer-bred and farmer-saved seeds are not seen as contributing to growth. It creates and renews life, but it doesn’t lead to profits. Growth begins when seeds are modified, patented and genetically locked, leading to farmers being forced to buy more every season.

Nature is impoverished, biodiversity is eroded and a free, open resource is transformed into a patented commodity. Buying seeds every year is a recipe for debt for India’s poor peasants. And ever since seed monopolies have been established, farmers debt has increased. More than 270,000 farmers caught in a debt trap in India have committed suicide since 1995. […]

READ @ https://www.commondreams.org/view/2013/11/01-2

Apr 072013
 

By Marie Dufaux, Eric Toussaint, CADTM

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This is a historical moment. On 23 and 24 March 2013, a coalition of left secular Tunisian political parties (in which there are 11 political formations) organised a meeting of Mediterranean region progressive parties to call for the abolition of the odious and illegitimate debts of Northern and Southern Mediterranean countries. Two half-days of debate produced a final declaration and were followed by a grand public conference bringing together over one thousand people and all the strength of the left-wing groups united for a common cause. |1|

Below are highlights of Eric Toussaint’s speech at this first Mediterranean coordination meeting against debt, austerity policies, and foreign domination, and for a free, united, democratic, social, solidarity-based, feminist, and environmentally responsible Mediterranean region.

Eric Toussaint, President of CADTM Belgium stressed that this budding political alliance is the continuation of the struggle initiated by Thomas Sankara, President of Burkina Faso, who was assassinated on the 15 October 1987, after he called on the people of Africa and the rest of the World to unite in a common combat for the non-payment of the illegitimate debt. It also extends the struggle of the martyrs of the Arab Spring, including Chokry Belaid, assassinated on 6 February 2013, not to forget Ahmed Ben Bella, the first President of independent Algeria, who died in April 2012, |2| and who, towards the end of his life, had made the abolition of illegitimate debt one of his principal struggles.

This new coordination is facing another major challenge. All too often, left-wing parties limit their engagement to a radical denouncement of illegitimate debt without giving the question further importance in their day to day public activities. Once they start to approach positions of power, some of them abandon their promises to put an end to illegitimate debt, and end up agreeing with the terms of repayment.

Eric Toussaint presented the initial definition of odious debt as debt taken on by a dictatorial regime such as that of Ben Ali. According to international law, when such a regime falls, the part of the debt that is odious falls with it, and therefore should not in any case be repaid. Of course, we must often fight for international law to be respected. To achieve this goal, only a strong social movement can convince a government to suspend payments and repudiate odious debt. It is therefore essential to create a favourable balance of power in order to defy the creditors.

Today, international law defines odious debt in terms of three criteria: |3|
the non-consent of the people in the indebted state;
the lack of advantages for the people in the indebted state;
the creditors were aware that the loans they consented were not in the interest of the people and were not approved by them.

The debt “owed” to the Troika (European Central Bank, European Commission and the IMF) by countries like Greece, Ireland, and Portugal should be denounced because it corresponds to these criteria: 1. The people in the countries concerned did not give their consent, and many governments elected on anti-austerity programmes bend to the will of the Troika once they are in power; 2. This debt is not favourable to the people, on the contrary, it is linked to violations of their economic, social, and civil rights (reductions in social services and wages, large scale lay-offs, difficulty in gaining access to health services and education, repeal of collective bargaining agreements, disregard for the democratic choices made by electors, legislative power that bows down to the executive); 3. The creditors (the Troika and bankers), know perfectly well that the loans they advance are not in the interest of the people, because they are made in order to pay off the debt and in exchange for drastic austerity measures. It is the Troika itself that imposes these violations of human rights and dictates its conditions to governments and parliaments of indebted countries.

As for the governments that have come into power since 2011 after the dictators Ben Ali and Mubarak, they have themselves taken on new debt, which is much more to the advantage of the creditors than to the people. This is done to pay back the odious debts inherited from the previous dictatorial regimes and to pursue policies weakening their countries. Therefore, this new debt is also odious.

Tunisia and Egypt are currently negotiating new arrangements with the IMF. |4| This is a fruitless process. If these loans are granted, they will be illegitimate for at least two reasons: they will be used to continue making repayments on inherited odious debt, and they will be linked to policies that are contrary to the interests of the people in these countries.

Other elements that may make a debt illegitimate

On the one hand, the debt may be the consequence of unjust fiscal policies. In real terms, states accord fiscal advantages to big (national and international) companies and the wealthiest households, this reduces tax revenues and deepens public budget deficits. These practices increase public debt, because the governments must again borrow in order to finance their budget. Debt taken on in these conditions is illegitimate to begin with because it is socially unjust.

On the other hand, it may derive from bank bail-outs. Since 2007, governments of the most industrialised countries have flown to the assistance of private banks, that are responsible for the crisis, injecting billions of euros into their capital and/or providing other guarantees. Any debt taken on to finance these bail-outs is equally illegitimate.

Creditors and governments maintain that debt must always be repaid without questioning its origins, even if they are illegitimate. Then they justify the imposition of anti-social austerity policies by insisting on the effort necessary to balance the budget. It is within this context that a growing percentage of the people in Mediterranean countries (and beyond) are rejecting the repayment of illegitimate debt. In some countries (Tunisia, Greece, Portugal, Spain, and France) citizens audits have been called for in order to identify the illegitimate part of public debt. They are seeking to establish how, why, and by whom the debt was taken on, and if it has really been used in the interest of the people. These citizens audit committees are seeking to convince as many people as possible that illegitimate debt must be repudiated.

Saying “NO” to the Creditors

It is possible and necessary to defy the International Financial Institutions and the Troika, to refuse the diktats of the private creditors in order to create leeway for improving the situation of a country and its people. As we can see in the following examples of several countries that have dared to say “No” to their creditors, it is worth being adamant.

Argentina’s suspension of debt repayments

At the end of December 2001, after three years of economic recession (1999 – 2001) and pressure from a massive popular rebellion that caused the fall of President De La Rua, Argentina decided to suspend payments, amounting to about $90 billion. This represented an important portion of its commercial debt.

Part of the money freed up was reinvested in the social sector, particularly in benefits paid to unemployed ’Piqueteros’. Some would claim that the real reason why Argentina recovered as of 2003-2004 is only because of the increase in the prices of its exports.

This affirmation is, however, false, because if Argentina had not suspended its debt repayments, the revenue from exports would have been swallowed up by them. The government would not have had the means necessary to stimulate economic activity. In addition, thanks to this suspension of payments that lasted until March 2005, Argentina was able to impose a 50% reduction of this debt on its creditors.

The CADTM, as well as numerous social movements and leftist parties proposed to Argentina to abolish, not only the debt that concerned private creditors, but also the IMF and other public creditors. The Argentine government did not follow this recommendation.

It is important to note that Argentina has also suspended payment of $6.5 billion to the Paris Club since 2001. So we see that twelve years later Argentina is still holding out against the Paris Club. In spite of the 44 law suits brought before the World Bank and recent threats of expulsion from the IMF, Buenos Aires maintains its position. Argentina has not borrowed on the financial markets since 2001, but the country continues to function!

The Argentine experience must not be misinterpreted. It is not to be taken as an example, and we always need to adopt a frankly critical point of view. The Argentine government has maintained Argentina within the bounds of capitalism, no structural reforms have been undertaken, Argentine economic growth is largely based on the extraction and the exportation of primary products (genetically modified soya beans, ores,…). Nevertheless, what Argentina has demonstrated is that saying “No” to the creditors is possible. Elsewhere, an authentic left-wing government could go much further on the basis of this precedent.

Ecuador: audit and suspension of payment

Ecuador gives us another example. In July 2007, seven months after his election, the Ecuadorian President Raphael Correa decided to instigate an audit of the country’s debt and the conditions in which it was contracted. An audit commission, made up of 18 experts including the CADTM, was created for this purpose. Its final report was presented after 14 months of investigation. It showed in particular that numerous loans had been contracted in violation of basic rules. In November 2008, the new administration, on the basis of this report decided to suspend the repayment of bonds payable in 2012 and 2030. Finally, the government of this small country came out on top in the tussle with North American bankers and those holding Ecuadorian securities. It repurchased bonds for less than $1 billion, which had a nominal value of $3.2 billion. Public finance thus saved $2.2 billion dollars of debt stock to which must be added $200 million a year (between 2008 and 2030) in interest payments. This allowed the government to allocate more means to social projects in health, education, social assistance, and communication infrastructure development. The Ecuadorian constitution now prohibits private debt from being transformed into public debt and illegitimate debt from being contracted. |5|

In addition, Ecuador no longer recognises the World Bank’s jurisdiction in international disputes court. It has rejected free trade treaty propositions from the US and UE. The Ecuadorian President has announced his intention to audit the current bi-lateral investment treaties. Finally, the Quito authorities have put an end to the US military presence on its territory.

In the case of Ecuador, we must again be careful not to hold up this ongoing experience as a model to be emulated. Critical analysis remains indispensable. Nonetheless, the Ecuadorian audit and unilateral suspension of payments experience shows that saying “No” to creditors is perfectly possible, and there are advantages to be gained in terms of making more means available for public health, education, and other sectors.

Iceland’: refusal to pay the demands made by the Netherlands and the UK

After its banking system collapsed in 2008, Iceland refused to compensate the British and Dutch savers who had put deposits amounting to €3.9 billion into subsidiaries of Iceland’s failed private banks. The British and Dutch authorities covered the losses to their citizens and presented the bill to Iceland. Under popular pressure (demonstrations, occupations, and referendums), the Reykjavik authorities refused to pay. Britain put Iceland on its terrorist list, froze its assets and, in conjunction with the Netherlands, sued Iceland the EFTA court. |6| Meanwhile, Iceland has completely blocked the outflow of capital. In the end, Iceland is faring better than the other European countries that accepted the conditions imposed by creditors. Here again we must not present Iceland as a model to be imitated, but learn from its experience.

These examples demonstrate that saying “NO” to creditors leads neither to catastrophe nor to the collapse of a country.

We must also recall that these experiences were preceded or accompanied by a popular movement that put pressure on the governments concerned. It is therefore important, as Eric Toussaint reminded us, that knowledge of this at times, complex question must conveyed to the whole of the population. The task of a public audit is to raise public awareness. The illegitimacy of public debt must become visible to the majority of people.

To conclude this workshop, Eric Toussaint repeated that the above examples are not to be taken to as political models to be followed, but that these experiences are a source of important political lessons!

Translation : Mike Krolikowski and Charles La Via

 

Footnotes

|1| See Pauline Imbach, “Tunis: Birth of a Common Front of Political Organisations Against Debt”,http://cadtm.org/Tunis-Birth-of-a-C…, published 25 March 2013.

|2| See Eric Toussaint, “Remembering Ahmed Ben Bella, first President of independent Algeria who passed away on the 11th April, 2012 at 96”, http://cadtm.org/Remembering-Ahmed-…, 12 April 2012.

|3| See CADTM, http://cadtm.org/Droits-devant, and in particular Stéphanie Jacquemont, “Que retenir du rapport de l’expert de l’ONU sur la dette et les droits humains ?”, http://cadtm.org/Que-retenir-du-rap… , 25 January 2013 (articles in French only).

|4http://www.imf.org/external/np/sec/…

|5| See Eric Toussaint, “La Constitution équatorienne : un modèle en matière d’endettement public”,http://cadtm.org/La-constitution-eq… , 27 December, 2010 (in French only).

|6| The EFTA (European Free Trade Association) court, which is in no way a progressive organisation, has judged in favour of Iceland’s position. See CADTM, “EFTA court dismisses ’Icesave’ claims against Iceland and its people”, http://cadtm.org/EFTA-court-dismiss…, 29 January 2013.

Mar 202013
 

By Renaud Vivien and Cécile Lamarque, CADTM

2012-10-10_debt_03

There are several legal arguments on which a suspension, or even a cancellation, of repayment of public debts can be based. In order to establish the invalidity of a loan agreement it is necessary to take into account not only the dispositions of the agreement but also the circumstances in which it was signed and the actual use of the borrowed money |1|. It will obviously be necessary to audit the debt to shed light on those various elements. Governments that wish to reduce their debts can use arguments from public international law, among which are those appearing below, in order to find legal grounds for cancellation/repudiation of part of their public debt |2|.
Defects of consent

The 1969 Vienna Convention on the law of treaties and the 1989 Vienna Convention on the law of treaties between States and International Organizations point to various defects of consent that can result in the loan agreement being void, among which are included:

absence of competence in a contracting party |3|. For instance, this violation was the legal motivation for Paraguay repudiating a debt amounting to USD 85 million in 2005. Indeed the Consul of Paraguay in Geneva who had signed the loan in the name of its government had no legal power to contract a loan with the private bank Overland Trust Bank |4| ;

direct or indirect corruption of a contracting party during negotiations |5|. An example could be contracts signed between Greece and the TNC Siemens, which has been charged by the German and Greek justice with paying Greek political, military and administrative officers commissions and bribes amounting to about one billion euro ;

coercion |6| through acts or threats of a contracting party. Coercion was used by the French in 1824 to force Haiti to pay a colossal ransom for the recognition of its independence. To this end thirteen French vessels with 494 cannons surrounded the island’s coasts with clear instructions: in case of refusal ports were to be closed by force. Coercion also raises the issue of a political balance of power that is favourable to creditors. Indeed when there is a lack of balance beteween the contracting parties, debtors’ freedom to negotiate is restrained, while creditors can have their way. This is how in 2010 the Greek government was under the pressure of the French and German authorities that wanted to guarantee their arms exports. The military-industria lobby managed to maintain an almost intact defence budget while the PASOK government agreed to major cuts in social expenditure ;

fraud |7|. If a State was led to contract a loan through the fraudulent conduct of another State or of an international organization that participated in the negotiations, it can point to fraud as invalidating its consent to be bound by the said contract. We can describe as fraudulent the acts of the IMF and of the World Bank considering the abyssal gap between their discourse and reality. Indeed in article 1 of its statutes the IMF defines one of its main purposes as to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy |8|. In fact this institution, in coordination with the WB, does exactly the opposite and thus violates its own statutes. Unemployment steadily increases as a consequence of implementing measures that were recommended by the IMF and/or the WB. We can also notice a frequent diminution in the incomes of wage earners, small producers and the lower middle class. Not to mention widening social discrepencies in most countries where these institutions have been active |9|.

Illicit or immoral cause of the contract

This legal ground can be found in the civil or commercial national law of several countries. Among the illicit or immoral causes invalidating a loan contract we find:

the acquisition of military equipment. Article 26 of the 1945 Charter of the United Nations specifies that States have to regulate arms trade and limit to a minimum the resources they dedicate to military expenditure. Now we know that military expenditure increases globally year after year in violation of the UN Charter;

tied aid. Confronted as they were with massive recession and unemployment in the 1970s, rich countries decided to give purchasing power to the countries of the South so as to prompt them to buy goods produced in the North by granting them state to state loans, often in the form of export credits: this is called tied aid. For the borrowing countries it results in a significant increase in the cost of purchased goods and services and higher levels of indebtedness. According to a survey by the WB, from 1962 to 1987 African countries paid more for imported steel products than industrialized countries (up to 23 % more in the case of France ). This practice is all the more illegitimate as in most cases those tied loans do not meet the actual needs of the country but the commercial interests of the creditor. This motivated Norway to unilaterally and unconditionally cancel the debts of five countries, namely Ecuador, Egypt, Jamaica, Peru, and Sierra Leone in 2006 ;

The example of Norway

On 2 October 2006, during a press conference in Oslo, the Norwegian minister for international development, Erik Solheim, announced the unilateral and unconditional cancellation of debts owed by the five following countries: Ecuador, Egypt, Jamaica, Peru, and Sierra Leone, thus ackowledging Norway’s responsibility in their illegitimate debt. These cancellations amounted to about USD 80 million |10|. The decision was motivated by the fact that ‘the claims derived from a failed development project – the Ship Export Campaign of the late 70’s’: This campaign represented a development policy failure. As a creditor country Norway has a shared responsibility for the debts that followed. In cancelling these claims Norway takes the responsibility for allowing these five countries to terminate their remaining repayments on these debts |11|. For the first time in history, a country of the North admitted to being responsible for inadequate loan policy and took measures to remedy what had occurred. The decision represented a break with today’s tacit consensus within the Paris Club. Norway’s move is a significant step towards the recognition of creditors’ responsibility in the process of illegitimate debts. │

financing conditioned to structural adjustment. As claimed by special rapporteur Mohammed Bedjaoui in his draft article on succession in respect of State debts for the 1983 Vienna Convention: From the standpoint of the international community, an odious debt could be taken to mean any debt contracted for purposes that are not in conformity with contemporary international law and, in particular, the principles of international law embodied in the Charter of the United Nations |12|. In this respect multilateral debts contracted in the context of structural adjustments are odious and therefore illicit debts since the damaging nature of such policies has been abundantly shown, notably by UN bodies. Conditionalities atached to these debts manifestly violate various texts on protection of human rights. Surrender of the sovereignty of States is further aggravated by dispositions in most international loan contracts that stipulate that jurisdictions in the North are competent and that rules favourable to creditors have to be applied in case of dispute among contracting parties. In Ecuador the Commission of integral audit of public debt (CAIC) highlighted that the enforcement of policies by the World Bank and other multilateral institutions via programmes they have financed and conditionalities attached to loans means denying state soveneighty and interfering into its internal affairs. Many multilateral loans also violate economic, social and cultural rights. In its recommendations the CAIC proposes to stop paying several debts cliamed by multilateral institutions ;

projects that are either unprofitable or detrimental to populations or to the environment. Included amongst these projects are « white elephants », such as the Inga dam in the DRC (ex-Zaïre) which has been of no benefit to the population whatsoever: to date, less than 10 % of the Congolese population has access to electricity. Examples of debt generating projects are equally common in the north. We can cite the scandal of the 2004 Olympic games in Greece, to name but one. Although the Hellenic authorities foresaw expenditure in the range of 1.3 billion dollars, the cost of these games in fact exceeded 20 billion dollars ;

private debt transformed into public debt. The financial crises which occured during the 90s in south east Asia, Equador, Argentina, Brazil and Russia originated from measures extolled by the World Bank and the IMF, who impose the deregulation of the financial system and the prohibition of State control of the movement of capital. The result is that as a consequence of the reduction in the profits perspective, foreign capital has fled from these countries, causing a chain reaction of bankruptcy of banks. The debts of these private banks then became the public debts of States under the impetus of those responsible for these crises: the World Bank and the IMF. The world crisis, which erupted in 2007, aggravated the situation with regard to public finances and accrued the level of public debt (mainly in the north), so that banks in the north intervened in order to save the banks that had gone into bankruptcy. The cause of this public indebtedness in the south and in the north (linked to the nationalisation of debts in the financial sector) is, at the very least, immoral, given that those directly responsible for these crises are international financial institutions and private banks. The staggering increase of this public debt is also the result of neoliberal politics practiced during the 80s and 90s, the main characteristics of which were to reduce the taxes of the rich and of large companies. The State revenue was no longer sufficient and it was necessary to resort to public debt in order to finance the State’s expenditure. In Equador the CAIC condemned the transfer of private debts to the State, which occured in 1983 and 1984 under pressure from the IMF and the World Bank, while the country was crippled by a severe financial crisis. After this operation, which was extremely damaging to the nation, was made public, the new Constitution of Equador, adopted in September 2008, expressly forbade the transformation of private debts into State debts ;

the repayment of old illegal loans. According to the judicial argument regarding continuity of an offence, an illicit debt does not cease to be illegal following a renegotiation or restructuration process. To this effect, it retains its original vice and the offence lasts through time. Consequently, all public loans aimed at repaying old illegal debts are themselves illicit. The debt audit will allow light to be shed on the original illegal debt. For example, the argument of continuity of an offence has been used by the Audit commission in Equador (CAIC) to denounce the numerous irregularities (since the socialisation of private debts, of the Brady Plan |13| and of the restructuration of debts… |14|) which has led to the issuing of bonds for the commercial debt. Based on the audit results, the Equadorian authorities refused to pay this commercial debt to private international banks (« Global 2012 and 2030 » bonds). In June 2009, after a showdown with the bankers who held the titles of the Equadorian debt, the holders of 91% of the bonds in question accepted their repurchase by Equador at a reduction of 65% of the nominal value;

the repayment of debts already paid. The obligation of a state to honor its debts is notably limited by broad legal principles, such as equity, good faith, abuse of rights or the accumulation of wealth without cause. Yet the debts of developing countries have been repaid several times over: according to the statistics provided by the World Bank, the governments of developing countries have already repaid the equivalent of 98 times of what they owed in 1970, but in the meantime their debt has been multiplied 32 times. This implies that developing countries have the right to repudiate their debt and reclaim what has been unduly taken by their debtors, on the basis that they have been accumulating wealth without cause. This is also the stance taken by several national civil codes: the Argentinian civil code in articles 784 and those following, the Spanish civil code in articles 1895 and those following, the French civil code in articles 1376 and those following. Developing countries, but also countries in the north, are trapped in a vicious circle in which they borrow each year in order to be able to meet their repayments. This situation is namely the consequence of the brutal and unilateral increase in interest rates by the United States in 1979, the application of usurious interest rates or of the capitalisation of interest (anatocism), which is moreover prohibited or strictly controlled in several national judicial orders, for example in Équador, France, Italy, Germany…

Illicit use of lent money

The destination of borrowed funds is a determining factor when it comes to deciding on the legality of a debt. For this it is necessary to examine the nature of the lending regime, its behavior in terms of human rights, as well as the actual allocation of these funds. To this effect the following cases are deemed to be illegal:

 debt born of colonialisation. During the 50s and 60s the World Bank granted several loans to colonial metropolis nations, such as Belgium, France, Portugal and Great Britain, for projects that permitted them to maximize the exploitation of their colonies. The majority of these debts of colonial power issued by the World Bank were subsequently transferred to the ex colonies at the moment of their independence in the 60s, without their consent. Yet these debts arising from colonialization are void in the eyes of international public law. The Treaty of Versailles of 1919 states in article 255 that Poland is exonerated from paying « the fraction of the debt of which the Reparation Commission attributes the origin to measures taken by the German and Prussian governments for German colonialization of Poland ». A similar stance was taken in the 1947 peace treaty between Italy and France, which declares « inconceivable that Ethiopia should take on the burden of debts contracted by Italy in order to assure her domination of the Ethiopian territory ». Article 16 of the Vienna Convention of 1978 which governs the law of the Treaties does not say anything different : « A newly independent state is not under obligation to maintain a valid treaty nor to be party to it merely because on the date of succession of States the treaty was valid with regard to territory referred to in the succession of States» ;

 loans granted to dictatorships. The dictatorial nature of a regime under which a debt has been contracted allows its repayment to be challenged, even if the State representative who has concluded the loan had the competence to do so, by virtue of internal state law. In effect, in international law, debts contracted under dictatorships take on the qualification « odious debt », according to the doctrine of the same name written by Alexander Sack in 1927 : « If a despotic power contracts a debt not for the needs and in the interests of the State, but in order to strengthen his despotic regime, to repress the population combatting it, etc, that debt is odious for the population of the entire state […]. This debt is not obligatory for the nation, it is a regime debt, a personal debt of the power that has contracted it, consequently it falls along with the fall of this power ». Alexander Sack adds that when the creditors of such debts are aware of the cause they are lending for, they « have committed a hostile act towards the people ; they cannot therefore assume that a nation liberated from a despotic power will take on the « odious » debts that are the personal debts of this power |15| ». The doctrine of the odious debt therefore gives scope for invalidating several loans such as those contracted by dictatorships in Latin America from the 60s to the 80s, in Africa, with the emblematic case of Mobuto’s Zaire (1965-1997), by former Soviet bloc regimes such as the dictatorship of Nicolae Ceaucescu in Roumania, the dictatorships of South East Asia and the Far East (Ferdinand Marcos from 1972 to 1986 in the Philippines, Mohamed Suharto from 1965 to 1998 in Indonesia, dictatorial regimes in South Korea between 1961 and 1981, in Thailand between 1966 and 1988), the military junta in Greece from 1967 to 1974, the dictatorships in North Africa which fell at the beginning of 2011, such as that of Zine el-Abidine Ben Ali in Tunisia (1987-2011) and Hosni Moubarak in Egypt (1981-2011). Commenting on this doctrine of odious debt, legal counsellors of the First National Bank of Chicago point out that « the consequences for the loan agreements of a change of sovereignty partly depend on the use of the funds by the former State. If the predecessor’s debt has been qualified as « odious », in other words, if the funds have been used against the population, the successor cannot be made responsible for the debt » and adds that « commercial banks have to be on their guard about this doctrine […] because succeeding governments have invoked doctrines based on the « odious » or « hostile » use of funds. The lenders should describe in detail the use to which the lent funds shall be put and, as far as possible, involve the beneficiary in the representation, guarantee and surveillance of the use of said funds |16| » ;

 loans to supposedly “democratic” regimes which violate jus cogens . All debt contracted by governments violating the imperative norms of international law as per jus cogens are also null and void, without it being necessary to prove that the creditors intended to become complicit in the exactions of these regimes. This assertion is upheld by the Vienna Convention on the 1969 Law of Treaties, which, in its Article 53, provides for the nullity of acts contravening jus cogens, bringing together, amongst others, the following norms: the prohibition of waging aggressive war, the prohibition of practicing torture, the prohibition of committing crimes against humanity, and the right of peoples to self-determination. As such, any loan granted to a regime that does not respect the fundamental principles of international law, whether democratically elected or not, is null. For example, we can cite the regime of Apartheid in South Africa or the Israeli Government. In this case, the destination of the loan is not requisite in classifying the debt;

loans misused with the complicity of the creditors. The Odious Debt Doctrine also touches on this category: “loans incurred by members of the government or by persons or groups associated with the government to serve interests manifestly personal — interests that are unrelated to the interests of the State.” Indeed, “debts must be contracted and the ensuing funds must be used for the needs and in the interests of the State.” In order to illustrate this aspect of the doctrine, we can cite the arbitral award handed down in 1923 in a case between the United Kingdom and Costa Rica. In 1922, Costa Rica enacted a law annulling all contracts passed by the former dictator Federico Tinoco between 1917 and 1919, and thus refused to honor the debt that it had contracted from the Royal Bank of Canada. This was therefore a case in which the doctrine was applied to a commercial debt. The ensuing dispute between the UK and Costa Rica was arbitrated by the President of the Supreme Court of the United States, Justice William Howard Taft, who declared that the decision of the Government of Costa Rica was valid, highlighting: “The case of the Royal Bank depends not on the mere form of the transaction but upon the good faith of the bank in the payment of money for the real use of the Costa Rican Government under the Tinoco regime. It must make out its case of actual furnishing of money to the government for its legitimate use. It has not done so. More recently, the CAIC in Ecuador demonstrated that certain loans had been deviated from their original “development” aims. Indeed, three loans from the Inter-American Development Bank (IDB), which were supposedly intended to benefit the agricultural, financial and transport sectors, were partially used to purchase Brady Bonds.

For unilateral action against illegitimate debt

There is no absolute obligation to repay debts under international law. By contrast, international law does require state authorities to protect human rights as a priority. Given the burden of sovereign debt and the impact of austerity measures on the populations of the Global North and South, governments must use their right to unilaterally suspend the repayment of their national debt, following the example of Argentina (in 2001), and Ecuador (in 2008); the latter having done so partially. During this period of debt-payment suspension (with a freeze on interest rates), it would be in the interest of these governments to audit their sovereign debt, both internally and externally, in order to identify any irregularities tarnishing loan contracts. They can then call upon the provisions of public international law (amongst others) in order to unilaterally declare the nullity of any illicit debts, as Paraguay did recently, in 2005. This example is not an isolated case. Throughout history, many governments have refused to repay debts inherited from preceding regimes, arguing that this debt was only bound to the regime in question, and not to the State |17|.

These unilateral actions do not contravene international law, as the sovereign decision to annul/repudiate debt does, indeed, come under the category of unilateral actions, which are sources of international law and can be used against creditors |18|. The CADTM is, of course, in favour of this type of unilateral action to protect human rights.

In this respect, initiating international arbitration on debt is not desirable. Indeed, this mechanism can only be fair and effective if human rights take precedent over creditors and if the people are not confined to the simple role of “witness”. However, the current political balance of power in favour of creditors threatens being detrimental to the peoples of the Global South and North. The rules of procedure underpinning arbitration and subsequent rulings are the result of negotiations between creditors and debtors. In this context, the legal notions that we have put forward would certainly not be accepted by the majority of creditors. We will, of course, recall the hostility of the World Bank toward the Odious Debt Doctrine in its report published in September 2007, entitled “Odious Debt: Some Considerations |19|.” The same is true for other legal arguments such as the unfounded accumulation of wealth, wilful misrepresentation, the misuse of powers, equity, good faith, etc.

Beyond the controversy over the notions of “odious debt” and “illegitimate debt,” the quasi-general hostility of creditors toward establishing a link between debt and human rights should be noted. Here we can refer to an interview with the current UN Independent Expert on Foreign Sovereign Debt, held in 2009: “the States of the North believe that the debt problem is in no way related to human rights, that it is purely economic, and that it should therefore be dealt with outside of the Human Rights Council and the UN General Assembly […] The opinions of the officials of the World Bank with whom I have consulted differ on this matter. Some categorically refute a human-rights-based approach in order to only consider the economic aspects of debt |20|.”

Therefore, if an arbitration action were to be initiated, the people would certainly be the losing party. This is because, on the one hand, the ensuing ruling would risk legitimising debts classified as “odious” and “illegitimate” by the social movements or governments that had identified them as such via an audit. The government of the indebted country would then be bound by the ruling and thus have to repay these debts to the detriment of the fundamental needs of its population. On the other hand, these rulings would constitute international jurisprudence, which would serve as a source of inspiration when ruling on future actions. When applied in this way, to the benefit of creditors owing to the current political balance of power, these rules would not favour “responsible” lending policies.

For all of these reasons, it would therefore be in the interest of these governments to take immediate, unilateral action on debt. This aligns with the example of the jurists in attendance at the 1st International Conference of Jurists held in Quito in 2008: “We support the sovereign actions of States which, on legal grounds, declare the nullity of illicit and illegal national debt instruments and with it the suspension of payments. |21|” The classification used (“illicit debt” or “illegitimate debt”) is of little relevance, we call on all borrowing governments, and also lending governments, to repudiate/annul all debts and austerity policies that are not in the interests of the population.

This is why the CADTM is also encouraging legislative initiatives and referendums against laws, regulations or agreements that are contrary to popular sovereignty or the respect of fundamental rights, whether these are currently in force or under negotiation. Public consultations on the non-repayment of a debt, similar to the referendum held in Iceland on the “Icesave” Act , are another example of the mechanisms that must be promoted and of which the results must be heeded by state authorities |22|.

 

Footnotes

|1| The consequences of re paying debts on human rights can be called upon to suspend repaying debts up to declaring some debts void.

|2| We must be aware that States can also use their own (public and private) law, which is not discussed here.

|3| Article 46 of the 1969 and 1986 Vienna Conventions.

|4| See Hugo Ruiz Diaz, ‘La dette du Paraguay auprès des banquiers privés : un cas de dette odieuse,’ 2nd section in ‘L’audit citoyen de la dette : un instrument de démocratisation des relations économiques et de contrôle démocratique des actes des gouvernements,’ http://www.cadtm.org/L-audit-citoye…
Article 50 of the 1969 and 1986 Vienna Conventions.

|5| Article 50 of the 1969 and 1986 Vienna Conventions.

|6| Article 51 of the 1969 and 1986 Vienna Conventions. Article 52

|7| Article 49 of the 1969 and 1986 Vienna Conventions.

|8| See http://www.imf.org/external/pubs/ft…

|9| Éric Toussaint, The World Bank, a never ending coup d’état, VAK, Mumbai, 2007

|10| Contrary to current practice, this has fortunately not been included in the accounts of the Aid to Public Development (APD).

|11| See article, ‘Why Norway took Creditor Responsibility – the case of the Ship Export campaign’, written by Kjetil G. Abildsnes, March 2007. www.forumfor.no/noop/file.ph…

|12| Mohammed Bedjaoui, Ninth report on succession in matters other than treaties, Definition of an odious debt, 129, http://untreaty.un.org/ilc/document….

|13| In May 1989 the United States renouced the Baker plan (the call to private banks to finance only « well reputed » countries, to the advantage of the Brady plan which consists of reducing the debt, namely by creating parallel guarantees, and by applying tax relief on debts on the secondary market.

|14| These irregularities and illegitimacies have been underlined in the report presented by the sub commission of the commercial debt of the CAIC. See the CAIC website: www.auditoriadeuda.org.ec.

|15| Alexander Nahum Sack, Les Effets des Transformations des États sur leurs dettes publiques et autres obligations financières, Recueil Sirey, 1927.

|16| CAIC, Informe juridico, p. 191, available on the CAIC website
, www.auditoriadeuda.org.ec.

|17| CADTM, “Topicality of the Odious Debt Doctrine”, 2008, http://cadtm.org/Topicality-of-the-…

|18| Hugo Ruiz Diaz, “The Sovereign Decision to Declare Debt Null”, 2008, http://www.cadtm.org/La-decision-so… (Available in French only)

|19| See: http://siteresources.worldbank.org/…. This report, largely botched, biased and condescending toward organisations acting for fair solutions to debt, sparked strong reactions.

|20| Renaud Vivien, “Interview with the UN Independent Expert on Foreign Debt: “I encourage all States to carry out debt audits””, http://www.cadtm.org/Entretien-avec… (Available in French and Spanish only)

|21| Conclusions of the 1st International Conference of Jurists, Quito, 8-9 July 2008, http://www.cadtm.org/Conclusions-de…. (Available in French and Spanish only)

|22| For information on the legal aspects of public consultation, read Alejandro Teitelbaum, “International, Regional, Subregional and Bilateral Free Trade Agreements”, CETIM Report No. 7, 2010, p. 24, http://www.cetim.ch/en/documents/re…

Translation: Christine Pagnoulle, Ümit Hussein and Matt Jenkins

SOURCE @ http://cadtm.org/How-debts-can-legally-be-declared