Presentation for ATTAC, Switzerland, 5th November 2011

The Greek Debt Crisis and the case for a Greek Debt Audit

Summary of Presentation

Part 1: Causes of the debt crisis (7 points)Part 2: Nature of the crisis

(Economic, social, psychological dimensions & social conflict)

Part 3: Why we need a debt audit (statement and 5 campaigning messages)

Part 4: The Greek Debt Audit Campaign (history, structure, achievements,

shortcomings)

The crisis in numbers• Cumulative loss of output 2010 to 2011 = -11%• Unemployment rate: 2008: 7.6% 2011: 17%

40% for those under 30yrs.• Severe Wage and pension reductions: public sector 20% in 1 year not incl.

October’s austerity package

• Draft Budget for 2012 : interest payments 17.9 bn EUR, or 8.3% of GDP, • Budget 2011: interest payments: 16.3 bn EUR or 7.4% of GDP• Public sector wages 2011: 10.2 bn EUR and pensions 6.6 bn EUR.

• Our taxation revenue 2011 is 52.9 bn EUR, our social spending is 51.6 bn EUR

• There is enough money if we stop repaying our public debt, which for this year only, servicing and interest payments amounts to 62 bn EUR.

• That is three times more than public sector wages and pensions, and ten times more than is spent on education.

Quick Points on causes for debt expansion

• Global Recession• Direct Liquidity Support to Greek Capital:

– Bailouts to businesses during the 1980s– Corrupt Public Investment Programmee.g. Olympic Games, Siemens are tip of iceberg

• Privatisations– Past: phone company, banks, national lottery.– Current: EUR 50bn planned in Mid term Plan

June 2011

• Military Spending: Average EU27 spends 1.6% of GDP, Greece spends 3.3% of GDP

• Low tax revenue– Low corporate tax rates: 15% whereas the

average of equivalent tax rates in the Eurozone: 27%

– Tax evasion– Regressive taxation

Participation in the Eurozone

• Greece joined euro at high rate of exchange.• Lost competitiveness: Low export / GDP: 21%• Developed entrenched current account deficit:15% in

2007 – 2008 due to the adoption of inappropriate policies.

• Financed the Balance of Payments with capital inflows in the form of bank lending, mainly from Germany and France

• Government debt and private bank solvency have become intrinsically linked

• The Greek economy, with a history of devaluations is being summoned to survive in an environment of appreciation of its currency of 64% in one decade (the amount appreciated vis-à-vis the dollar from 2/1/2002 until May 2011).

Debt servicing from 1991 till 2011 amounts to 513 billion Euros

(not including short term debts)

Current debt: 362bn EUR or 158% GDP

We have repaid a lot of debt…

Impact of the crisis

• Psychological and social impacts

• Social Conflict

Greek Reponses to the Debt crisis

• Spontaneous: Strikes, protests, occupations, Syntagma square, huge numbers, participation and diversity

• Long term: popular education, debt audit campaign

Why we need a Debt Audit

• To establish which parts of public debt are illegal, illegitimate, odious, or simply unsustainable.

• To provide the knowledge necessary to refuse to pay illegitimate debt.

• To encourage democratic accountability and transparency across the administration of the public sector.

• To state that governments must be bound primarily by their people, not by the unaccountable institutions of the EU, or by the IMF.

Transparency• Where did all that money go? Democratic right

to know where the money was spent

• Debt contracts are shrouded in corruption and scandals. Why should ordinary people pay for it and not those who created it?

• Bailout money should not socialise the losses of the private banking sector

• We claim that the debt is unsustainable and it should be cancelled.

Unconstitutionality • The International Treaty necessary to bypass

previous European law to allow for EU bailout packages grounds the EU portion of the loan with Greece.

• It lacks basic, formal constitutional requirements as it contains waivers of immunity clauses directly associated to national sovereignty.

• Greece lacks a constitutional court. On the other hand, the Constitutional Courts of Latvia, Hungary and Ukraine have all found the IMF to be in conflict with basic human (especially social) rights.

Foreign debt is not more important than basic human rights

• Human rights catastrophe in order to satisfy creditor demands

• The basic income tax level is being lowered to tax those under the official poverty line

• Schools and hospitals are closing• University departments are closing• Small and medium businesses are being wiped out• Thousands of young people are migrating abroad.• Working people are being forced to accept terrible

working conditions and pay because of the threat of unemployment.

• The state and all social services are in disarray as no one knows if they will be working a few months down the line.

• We should proclaim a state of emergency and cessation of payments to our creditors until all human rights can be secured.

• Government policies negate the rights guaranteed by international instruments such as the European Social Charter, the ILO Treaties and others.

• We should seek coverage from UN Covenants regarding the protection of civil and social rights and the Social Charter of the Council of Europe as legal instruments which the Greek state has an obligation to uphold.

• We denounce the government’s insistence that in times of crisis such petitions should not be recognised

• We have successfully overcome the first obstacle as the Committee of European Social Charter has accepted the admissibility of our petitions.

Austerity does not repay debts, but destroys people

• Austerity has a weak past record of correcting fiscal imbalances

• Greece: crumbling GDP + extra loans to pay off previous ones: our debt/GDP from 115% in 2009 will jump to 189% in 2012 (IMF estimates)

• Conditionality is being used to target the young, the women, the poor and the elderly

• Nothing is done to curtail tax evasion, to ensure fairer taxation policies (increasing corporate tax rates or taxing the rich and the church).

• Military spending/ GDP is extremely high

• Regressive taxation is exorbitant, with big jumps in VAT on basic goods

Debt is not just for the bankers to decide

• Debt negotiations are occurring behind closed doors in Europe, mediated by bankers’ interest groups and advisory bodies. Not even the Greek government has a say.

• Debt contracts and bondholders are shrouded in anonymity. We need to open up the books of the public debt and see who really needs to pay for the crisis. The banks must not profit again from the demise of the people.

• Since the terms under which loan contracts were agreed have now changed significantly, the repayment terms of these loans should also change.

Latest developments emphasize the urgency for a debt audit.

• None of the proposed solutions do anything but worsen the crisis for Greece. It leaves us with more debt/GDP than when we started.

• Creditor led solution does not help Greece’s debt problem:

• Agreement 21st July: incredibly beneficial to the banks, significant number of private investors covered only bought Greek bonds after the 21st of July

• Agreement 26th October: – comes with 130bn new bailout package– Unequally distributed haircut: IMF loans and ECB held bonds exempt– Pension funds will lose 11.5 bn EUR meaning after restructuring they will be severely

underfunded– The agreement comes with new austerity measure furthering the impoverishment of Greek

people– New bonds replacing old ones will come under UK law– As a guarantee creditors demand further reducing national sovereignty– All to achieve Debt : GDP 120% by 2020!

We need to proclaim cessation of payments NOW and begin a worker led democratic independent debt audit

The Greek Debt Audit Campaign

• Brief History

• Structure– Two Pronged Approach

a) Expert led and technocratic: grass roots self organised research groups

b) Political force and social movement: (call for debt audit in all work places, local councils, presence in the indignado movement, public awareness raising)

Progress

• Show of support: 60 000 signatures calling for an independent democratic audit of the Greek public debt

• Public awareness raising: numerous talk around the country, screenings of Debtocracy

• Insight into debt crises of the South, debt audit as a tool for social justice, potential for a strong North-South solidarity movement and intra-European movement

• Social Movement: with the slogan of “social democratic control of the debt” we were present in the square occupations for more than 2 months,

One example of a debt audit case

• Despite loans from an Austrian bank to a city council having been ruled illegal by the Greek courts, the IMF made payment of those debts a conditionality measure for the 5th tranche. i.e. the IMF enforces the Greek people to suffer wage (& other) cuts to pay off an illegal loan to an Austrian bank.

Difficulties

• Grass roots debt auditing organised from below has various weaknesses, mainly organisational

• We are a political movement primarily and secondly a technocratic research team. But we need to build on both simultaneously

Finally

• No matter how many austerity packages get passed, no matter how low wages and pensions get, the debt crisis will not go away

• Whatever the political developments if they do not drastically reduce the debt burden, governments will come and go!

• The Greek people will not give up!