Image by alles-schlumpf Initially promoted by leftist groups in Greece, the concept of odious debt is now steadily gaining a wider hearing in Greece as a growing number of voices in the country are beginning to make the argument that the cost of paying back ‘illegitimate’ debt should not be borne by the Greek people. Instead, they say, the burden should be shared by ‘predatory lenders’.
Echoing such sentiments, Eurodad’s Oygunn Brynildsen recently said that failing to hold lenders to account for reckless behaviour, combined with a lack of transparency, encourages bad lending and, ultimately, chronic and unjust debt.
Eric Toussaint, of the Campaign for the Cancellation of Third World Debt (CADTM), and member of the Audit Committee set up by the president of Ecuador, Rafael Correa, says that in order to avoid a large proportion of Ecuador’s publicdebt. In Ecuador, the debt audit helped successfully delete $3.2 billion from the debt.
Ecuador unilaterally eliminated as illegitimate ("illegal " or "odious") - a debt of 3.2 billion dollars. Despite the embargo of the markets, there have been no big negative consequences for Ecuador... On the contrary, the economy grew by 3.7% in 2010 and is expected to grow by 5% in 2011.
Now he says: The people of Europe should audit their creditors. It is not logical to repay illegitimate debts. Debt default and the denial of debt repayment have been linked to a national disaster. These “revelation images” are aimed to make people accept the policies that are being applied.
The Committee’s work in Ecuador, according to press reports, has recently been mentioned in the Greek Parliament by Sofia Sakorafa, but could the experience of Ecuador be helpful in Greece? Many Greek people are sceptical but nonetheless the idea is gaining momentum even if many are trying desperately to slam it.
Eric Toussaint believes it can apply in Greece. He says that while the economies of the two countries are different, the structure of Greek public debt has a lot in common with developing countries. Firstly, he points out, Greece is financing a part of debt in the form of bonds by the Government authorities (“securitization of public debt”), a technique used by Ecuador. Secondly, he notes, another large part of the Greek debt is in the form of bank loans, which is also the case for developing countries. As a result of the rescue plan in May 2010, he adds, Greece has borrowed from the IMF. “In other words, what is happening in Greece today is not very different from what has happened in many developing countries in recent decades, namely, through the IMF-imposed “Washington consensus”."
Eric Toussaint sees another common element: “Ecuador’s debt was mainly owed to the banks in the U.S. In 200 Ecuador abandoned its national currency and adopted the US Dollar, the currency of its lender. Similarly Greece has the same currency with its lenders, such as France and Germany, the Euro.”
The last observation does not mean that defaulting on the debt will necessarily be accompanied by exit from the euro: “There is not an automatic exit from the Eurozone if Greece is to stop paying. Greece will have to decide if it wants to remain in the Eurozone after a dialogue in the Parliament and with the Greek people.”
For Eric Toussaint, wages, pensions and savings can be secured. “If a state refuses to repay the debt, it saves money. In order to repay the debt, the state is using a very high volume of government spending money that could be used in order to pay salaries, to build public hospitals, schools and public agencies, to act to ensure the security of the country. The states that have defaulted up to now have realized that this has improved their ability to meet their obligations to their citizens.”
Also, considering citizens’ deposits, “the public authority must take responsibility and create a large public financial sector. The state can cover the cost of strengthening the banking system, by using the assets of the major banks’ shareholders.”
Although the reasons the debt increased to this level are different in Greece, Mr. Toussaint insists that the debt is not an issue that is only concerning Greece. “Greeks have to understand that they are not the exception to the rule. What has happened in Greece since April 2010 was repeated in Ireland in October 2010, it will happen again in Portugal, Spain and Italy. It would really be a shame for the Greeks to believe that they are an exception and to fatally accept the terms imposed on them.”
As a witness in defence of his claim for defaulting on odious debts, Eric Toussaint refers to the Nobel laureate economist J. Stiglitz, who in a 2010 study revealed that the economies of countries such as Russia or Argentina have been in a better financial situation since defaulting and have been able to save money to boost growth.
For Mr. Toussaint, Eurobonds are not a solution to our problem. First and foremost, he believes that the conditions for granting loans in Greece should be explored.
The question that we should primarily answer is: “Is it normal for citizens of a country like Greece, to repay a debt that is not legitimate?” If the loans had been made in the interests of citizens with respect for their basic needs and if the banks, mostly French and German, had acted carefully and rationally, then we would say that the debt should be repaid. But the bulk of debt is illegal and the bankers who purchased Greek titles must take their responsibilities. They have entered into loan agreements with unreasonable and illegal terms, and therefore they must accept the cancellation of a significant part of the debt.
Eric Toussaint refers to the “excessive military spending in Greece, much of which is due to Franco-German pressure.”
I believe we need a few rules for this exercise. Some conditions under which the debt is valid and the Greek people are responsible for it. I would suggest the following:
First and foremost: examining everything on a payments basis. There is no point engaging in a theoretical exercise about who caused our debt unless we can point to specific funds and their recipients. This helps put things in context. If Greece misprocured some wonky subs from the Germans that’s probably wrong but it means very little if this payment amounts to only about 0.1% of our public debt. This principle has one very important implication. This principle implies that the Greek people have no responsibility for debt on a conceptual basis but for individual transactions of the Greek state.
Second, constitutional legitimacy. Sure, no government has ever been democratically elected with a 100% majority. Greece also doesn’t employ promotional representation so our majorities are even smaller. But this is just the rules of our system. No one has demonstrated in favour of PR in years, so presumably this was not a priority for our people, i.e. they were happy enough for the show to go on. At any rate, ours is not, by the standards of developed or developing countries, a flagrantly undemocratic system. My argument from the above basically boils down to this: budgets passed into law by the Greek parliament and by due process must be taken to reflect the allocation of funds demanded by the Greek people.
Third, an intelligent people. By this I don’t mean that the Greeks are universally very bright but that they can construct naïve estimates of how the Budget is likely to go wrong. Budgets have, of course, been implemented with varying degrees of success, so it’s important to bear in mind that the deficit voted for each year need not be the deficit achieved. In fact it hasn’t at any point in the last decade. The additional borrowing involved has the potential to build odious debt, but not necessarily. A naïve estimate in this case would be to assume that a given year’s Budget will be violated to the same extent as last year’s; the latter violation must be estimated based on the latest information made public by the Greek government prior to the new Budget. For the 2008-9 periods this will be in the form of EDP notifications to Eurostat, whereas for the other years we’ll probably have to rely on the actual Budget reports. Any spending above this is a violation of the people’s mandate and the part of it that is financed by debt creates potentially odious debt. See below for a quick application of this with real figures:
It is becoming more and more clear that the Greek economic crises is not a result of the people's frailty or of the undisciplined character of the Greeks, but rather is the end product of a series of actions carried out by a corrupt political system that accepted money from multinational firms such as Siemens and Goldman Sachs to serve the interests of some cliques at the expense of public funds. It is the end product of years of unbridled spending in non-productive ventures. It is the result of decades of maladministration.
Today the public debt is increasing despite the strict austerity measures that have been imposed by the troika (IMF EU memorandum) and has become even worse for day to day life here from the measures that directly harm the welfare of Greek citizens. An increasing public debt that cannot be covered and with more measures and that goes directly against the fundamental needs of the people… this alone is a good reason for it to be audited. We are dealing with an Odious Debt, a debt that requires blood tribute to be covered which is by no means acceptable and this is where the essential lies of the creditors and their assignees come into play.
The first lie is that if Greece defaults everything will collapse, it will witness global marginalisation, it will run out of food and other similar catastrophic scenarios.
So what is the alternative you ask? To declare default the Greek people? To tell the people that we must drain the last vestiges of their resources to cover a debt that is not theirs? Or say that the debt resulted from the corruption of politicians who at the expense of personal interest sacrificed the fortunes of an entire nation? Or even tell the people that we will impoverish the lower classes that we will lead to smaller firms to bankruptcy and slash health system benefits … lies lies and more lies! How can they do all that while the plutocrats, the bankers, the multinational firms, the Church with its immense untaxed property will all remain untouched? Has anyone asked themselves that? I think not!
The other essential lie of the creditors is that we are extremely "lucky" that we received the joint aid of the EU and the IMF. This line really makes me laugh… which knucklehead believes this. Lucky that we are the only ones to fully experience the asymmetric shocks of a single currency that is no longer viable or a single currency that has only profited Germany all these years? What are we lucky for? Lowering our heads to the international banking Cartel and becoming an experiment by the west that has its own financial turmoil to deal with but nonetheless uses Greek politician yes men to hit the euro?
Meanwhile, esteemed Professor of Law, Kostas Beys, says that nobody in the Parliament has an actual concept of the memorandum since they have not even read it. His colleague and Professor of Constitutional Law Mr. G. Kassimatis, asked for the original international contract text, in English and French, which was submitted to the Greek Parliament and as he was looking for it he found out that no member of the Parliament even attempted to read its conditions.
Mr. Beys criticized the President of the Hellenic Republic, Mr. Karolos Papoulias, for his indifference on this matter and his inactive attitude due to the fact that the memorandum was not ratified by the increased parliamentary majority (or 180) as mandated by the Greek Constitution, nor was it signed by the President.
Both men more or less said that the memorandum is thus illegal, because it contains two articles in it that have never before been included in an international lending agreement. The two articles, according to the two men, state that Greece does not have any sovereign rights on, in and under its land. This basically means that everything in Greece that is on, below and underground right now belongs to the IMF and the EU. This is dangerous since Greece is in no position to negotiate anything within its boarders at the moment. They both called a modification to be made, since no other memorandum in history has ever had such articles included in it and it is therefore illegal. They also said that amendments need to be made to our Constitution so that they safeguard Greek interests which at this moment are in danger.
In my opinion, there is only one way out of this crises and that is to declare the debt Odious, denounce it and deny paying it back. I do not know to what degree, but as the days roll by and more and more information surfaces I am becoming more and more convinced that the “system” here in Greece does not want this because it does not want to lose its monetary policy powers. I think they should and I also believe that they should impose extremely strict measures on banks partially nationalising them, tax the plutocrats with proportion to their wealth and focus on ways to improve local production and help the real economy get back on track and for Christ’s sake stop hitting on the middle and lower class.
Of course those that support the system and the creditors will say that such actions are wrong and immoral. I think that the only thing that is wrong here is to listen to their lies and plunge Greece into even more agony.
Sources: http://protes-stavrou.blogspot.com/
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