Debtocracy

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About a month ago I proudly announced the formation of a new initiative that has issued a call for an audit of the Greek debt. Such an audit would throw up some interesting questions regarding the legality banks may have been lending in contravention of public debt rules of European debts. Last night, I proudly watched a documentary entitled “Debtocracy”, which I have posted on the sidebar.  I must say I was very impressed. After viewing it, I have once again begun to feel hopeful for the future of this country. It just adds to the recent upheaval of scholars and academicians who claim, and rightfully do so, that most of the Greek debt is illegal. I am now more optimistic than ever, and confident that at some point this whole concept will be raised in the Greek parliament as well.

It is the most obvious common sense to establish, when suddenly presented with a massive bill, beyond our ability to pay, that the debt was actually incurred and how it came to be so. 

My own view has long been that much of the Greek debt is odious an was only lent because the lenders were confident that, while what they were doing was wrong, they operated with impunity, guaranteed by their acconplices in government and of course the media.. I will not go into why, I have spoken about this so many times… 

It is common sense, those who lend governments money facilitate excesses which are masked from the public gaze. In a society in which the lenders are the owners of the media and control the information shared with the public it is not surprising that "national debt" is regarded as sacred. 

What is surprising is that sensible people share this view despite knowing very well that it consists in large part of monies that ought never to have been borrowed, lent at excessively high interest rates, which was wasted, stolen or spent on indefensible projects designed to benefit the same tight circle which borrowed, lent and used the proceeds.

Currently debt is being used as an excuse to remodel our society in a meaner, nastier image. While the individual situations of benefit claimants are subjected to intense scrutiny, simply in order that they may be rejected (any excuse will do) the vast invoices dropped into our laps by moneylenders are paid without question or inspection and this even though it is notorious that billions have been criminals got away with. 

This is a traler of the documentary, please watch full documentary on sidebar

How was the Commission formed?

The idea for this Commission began several months ago. In December 2010, the independent MP Sophia Sakorafa made a speech in the Greek Parliament proposing the creation of a Parliamentary Commission to audit the Greek public debt. This proposal attracted a great deal of attention. Sophia Sakorafa was a member of the ruling government party PASOK until she voted against the 2011 budget because of heavy debt repayments. 

When justifying her brave position, she extensively referred to the audit carried out in Ecuador in 2007-2008 which resulted in a significant reduction of the country’s debt. She proposed that Greece should follow the Ecuadorian example and asserted that there was an alternative to submitting to creditors, whether IMF or bankers. 

In making her case she placed stress on the “odious debt” that should not be repaid. This stance was widely covered by the media. 

Again in the Greek parliament, the leader of Synaspismos (a radical leftist party) Alexis Tsipras also asked for an audit commission to be set up so that the Greek people be informed on what part of the debt is odious, illegitimate and illegal. 

Suddenly, Greek public opinion began to change, and the media was forced to listen…

On 5 December 2010, a leading Greek daily published an op-ed by the Greek economist Costas Lapavitsas entitled: “International Audit Commission on the Greek Debt: an Imperative Request”. In his conclusion, the author writes: “The international commission will have a privileged scope of activity in our country. You only need to think about the debt agreements made with Goldman Sachs’s mediation or intended to finance the purchase of weapons to see how badly an independent audit is needed. If they are proved to be odious or illegal, these debts will thus be declared null and our country could refuse to repay them, while taking the people who incurred them to court.”

On 3 March 2011, Economists, activists, academics and parliamentarians from across the world supported a call to audit Greece’s public debts. 

The call demands the establishment of a public commission to examine the legality and legitimacy of debts with a view to dealing with them as well holding those responsible for unjust debts to account. 

There is widespread anger in Greece because debt has ballooned since the crisis of 2007-9. There is also belief that the debt is unsustainable and that austerity measures are forcing the poorest in society to pay for the economic problems caused by the crisis. 

The Greek campaign for a public audit has obvious importance for Ireland, Portugal, and Spain, and could lead to broader European action against debt. 

Trade unions, several political parties and many intellectuals support this proposal as a means of finding a solution to debt through cancellation on the one hand, and penalization of companies and people responsible for this illegitimate debt on the other. It should be noted that a Greek anti-debt committee was set up in 2010. 

These elements are encouraging. 2011 could mark the start of a welcome change as regards the Left’s ability to devise solutions to resist the diktat of creditors.

The group of some 200 academics, economists, MPs, and other notables includes former UN Assistant Secretary General Denis Halliday, and ten left-wing and Green MEPs, on Thursday (3 March) argued for the creation of a debt audit commission similar to that established in 2008 by the Ecuadorean government that ultimately led to a repudiation of ‘illegitimate’ debt. The concept has since been embraced by Irish campaign groups and organisers hope similar pressure to launch forensic investigations will also be mounted in Spain and Portugal and other heavily indebted European states.

The idea comes from European debt and development NGOs, including Jubilee Debt Campaign, a UK-based Christian charity, and Eurodad, the European Network on Debt and Development who have long campaigned for Western countries to cancel the debt of developing countries and are now turning their attention to the debt of peripheral euro zone states.

The audit commission will look into why public debt was incurred, the terms under which it was contracted, what the borrowed money was spent on and seek to establish who was responsible for problematic debt agreements. The group of signatories, which also include British director Ken Loach, American linguist Noam Chomsky, Slovenian philosopher Slavoj Zizek and Indian economist CP Chandrasekhar, say that the commission should have full access to public debt agreements and documentation for the last four decades, including bond issues, bilateral, multilateral, and other forms of debt and state liabilities.

The commission would also have the power to summon public officials to give evidence and examine Greek and foreign bank accounts.

Should proof emerge of portions of Greek borrowing incurred for wasteful or corrupt purposes, such findings could then be used as the basis for a repudiation, or default, of “odious debt”. Debts defined as illegitimate, odious or illegal could then be declared null and void and Greece could refuse to repay.

Odious debt a legal theory that posits that the national debt incurred by a despotic regime for purposes that do not serve the best interests of the nation do not have to be paid back.

The concept then began to be used in the late 1990s by development charities to argue that whether a government had been despotic or not, the debt burden forced on third world nations, particularly in Africa, was trapping countries in underdevelopment.

Core Eurozone banks and Berlin and Paris would likely be against such a move, as, according to the latest government budget,

Greek public debt is expected to rise from €299 billion, or 127 percent of GDP, in 2009 to €362 billion, or 159 percent of GDP, in 2011. Any substantial repudiation of this debt would punch massive holes in the balance sheets of the banks in the core of the Eurozone that performed much of the lending, mainly German and French institutions.

Similar effects would be felt by UK Banks in the case of Irish lending.

Such a development could also precipitate a fresh revival of market contagion were it believed that international lenders could be forced to incur significant losses.

Initially promoted by leftist groups in Greece, the concept is now steadily gaining a wider hearing as a growing number of voices in the country begin 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”.

As the instantaneous response of the fiscal sado-masochists suggests this is an idea whose time is long overdue.

How Feasible is this idea:

Very feasible…

Firstly, there is the debt contracted by the military dictatorship and which quadrupled between 1967 and 1974. This obviously qualifies as odious debt .

Following on, we have the Olympic Games scandal of 2004. According to Dave Zirin, when the government proudly announced to Greek citizens in 1997 that Greece would have the honour of hosting the Olympic Games seven years hence, the authorities of Athens and the International Olympic Committee planned on spending 1.3 billion dollars. A few years later, the cost had increased fourfold to 5.3 billion dollars. Just after the Games, the official cost had reached 14.2 billion dollars. Today, according to different sources, the real cost is over 20 billion dollars.

Many contracts signed between the Greek authorities and major private foreign companies have been the subject of scandal for several years in Greece. These contracts have led to an increase in debt. Here are some examples which have made the main news in Greece:

• Several contracts were signed with the German transnational Siemens, accused – both by the German as well as the Greek courts – of having paid commissions and other bribes to various political, military and administrative Greek officials amounting to almost one billion euros. The top executive of the firm Siemens-Hellas, |3| who admitted to having “financed” the two main Greek political parties, fled in 2010 to Germany and the German courts rejected Greece’s demand for extradition. These scandals include the sales, made by Siemens and their international associates, of Patriot antimissile systems (1999, 10 million euros in bribes), the digitalization of the OTE – the Hellenic Telecommunications Organization – telephone centres (bribes of 100 million euros), the “C41” security system bought on the occasion of the 2004 Olympics and which never worked, sales of equipment to the Greek railway (SEK), of the Hermes telecommunications system to the Greek army, of very expensive equipment sold to Greek hospitals.
• The scandal of German submarines (produced by HDW, later taken over by Thyssen) for a total value of 5 billion euros, submarines which from the beginning had the defect of listing to the left (!) and which were equipped with faulty electronics. A judicial enquiry on possible charges (of corruption) against the former defence ministers is currently under way. It is absolutely reasonable to presume that the debts incurred to clinch these deals are founded in illegitimacy, if not illegality. They must be cancelled.
• Beside the above-mentioned cases, one must also consider the recent evolution of the Greek debt.

The odious attitude of the European Commission

After the crisis broke, the military-industrial lobby supported by the German and French governments and the European Commission saw to it that hardly a dent was made in the defense budget while at the same time, the PASOK (Socialist Party) government set about trimming social spending (see the box on austerity measures below). Yet at the beginning of 2010, at the height of the Greek crisis, Recep Tayyip Erdogan, Prime Minister of Turkey, a country which has a tense relationship with its Greek neighbour, visited Athens and proposed a 20% cut in the military budget of both countries. 

The Greek government failed to grab the line thrown to them. They were under pressure from the French and German authorities who were anxious to safeguard their weapons exports. In proportion to the size of its economy, Greece spends far more on armaments than the other EU countries. 

Greek military spending represents 4% of its GDP, as compared to 2.4% for France, 2.7% for the United Kingdom, 2.0% for Portugal, 1.4% for Germany, 1.3% for Spain, and 1.1% for Belgium. |8| In 2010, Greece bought six frigates (2.5 billion euros) and armed helicopters (400 million euros) from France. 

From Germany it bought six submarines for 5 billion euros. Between 2005 and 2009, Greece was one of Europe’s five largest weapons importers. The purchase of fighter aircraft alone accounted for 38% of its import volume, with, for instance, the purchase of sixteen F-16 (from the United States) and twenty-five Mirage 2000 (from France) – the latter contract amounting to 1.6 billion euros. 

The list of French equipment sold to Greece goes on: armoured vehicles (70 VBL), NH90 helicopters, MICA, Exocet and Scalp missiles as well as Sperwer drones. Greece’s purchases have made it the third biggest client of the French military industry over the past decade. |9|

From 2010, increasingly high interest rates charged by bankers and other players in the financial markets, supported by the European Commission and the IMF, have triggered the usual “snowball effect” : the Greek debt has followed an upward trend as the country’s authorities take out loans in order to repay interest (and part of the previously borrowed capital).

The loans granted as from 2010 to Greece by EU member countries and the IMF will not serve the interests of the Greek people – quite the opposite. The austerity measures implemented entail numerous infringements of the people’s social rights. On that grounds, |10| the notion of “illegitimate debt” should be applied and its repayment contested.

Infringement of social rights

• Reduction of public sector wages by 20 to 30 %. Cuts in nominal wages that could reach 20%, 13th and 14th month salaries replaced by an annual lump sum, the amount of which varies according to wages. A freeze on wages over the next 3 years. In the public sector, 4 out of 5 workers who retire will not be replaced. In the private sector, massive wage cuts up to 25%.
• Unemployment benefits have been cut, and a poverty support scheme implemented in 2009 has been suspended. Drastic cuts in benefits for large families.
• Plans to end collective bargaining and impose individualized contracts instead. The existing practice of extended very low paid or even unpaid internships has been legalized. Resorting to temporary workers is now permitted in the public sector.
• Employment Drastic cuts in subsidies to municipalities, leading to mass lay-offs of workers. Sacking of 10,000 workers under fixed term contracts in the public sector. Public companies showing a loss to be closed down.
• Taxes Increase in indirect taxation (VAT raised from 19% to 23% and special taxes on fuels, alcohol and tobacco introduced). Increase from 11% to 13% of the lower VAT rate (this concerns staple goods, electricity, water, etc.). Increased income tax for the middle brackets, but reduced corporate tax.
• Privatizations Intention to privatize the ports, airports, railways, water and electricity supply, the financial sector and the lands owned by the State.
• Pension schemes Pensions are to be cut and then frozen. The legal retirement age has been increased, the number of years’ contributions required to be entitled to full pension benefits will be set at 40 in 2015 up from 37, and the amount of pension will be calculated on the average wages of the total working years and no longer on the last pay. For retired workers in the private sectors, the 13th and 14th month pension payments have been abolished. Spending related to pension has been capped to a maximum level of 2.5% of GDP.
• Public transport fares Price of all public transport fares increased by 30%.

Sources: Some portions of this article were taken from the article: Greece: The very symbol of illegitimate debt – Hellenes Online - www.hellenesonline.com