By Carlos Villota,
Two years after the Greek debt crisis first appeared in headlines across the globe, policy makers in
The debt problems in
For instance, in the case of
Refinancing in a debt crisis with new loans with policy conditions attached is nothing new. We have seen it fail before in different countries from Zambia in the 1980s to Argentina at the beginning of the last decade. So why are these policies still being pursued? One obvious aim is to recover as much of investors´ money as possible, whatever their responsibilities in causing the current crisis, by transferring liability to the whole of society. This is why the inevitable Greek writedown was delayed as long as possible and then investors accepted partial writedown only to avoid losing 100% in a total default.
Demanding debt justice in
Campaigners are demanding transparency. The call is simple: Tell us what we are paying for! Citizens stand up and demand transparency and information about what their taxes are spent re-paying. Learning from Southern debt campaigners, one of the tools used to address this opacity is to carry out debt audits, the purpose of which is to provide the knowledge on which truly democratic decisions should be based and to remove the mask of the financial system.
- In Ireland, inspired by debt campaigners across the Global South, Debt and Development Coalition
published a debt audit report, presenting an in-depth study of the Irish debt. The audit revealed that Ireland Ireland’s debt repayments for the now dead Anglo-Irish Bank will reach over €47.9 billion (That is 30% of ’s GDP) by 2031 if the repayments are not suspended. Irish campaigners demand the Irish government immediately stop servicing the debt of the now dead Anglo-Irish Bank and to enter into negotiations to ensure the debt is written down. Ireland
- Economists, activists, academics and parliamentarians from across the world are demanding the establishment of a Public Commission to examine the debts that lie at the root of Greece’s crisis.
- In Spain a movement in favor of audits and of awareness on debt has been developed. Similar actions are also taking place in Portugal,
A fair solution to debt crises is also needed
While transparency and non-payment of unjust debt is key to get out of the current crisis, long-term solutions are also needed otherwise debt crises will happen again. Across the world countries are increasingly turning to loans to cover rising fiscal gaps. The European crisis clearly repeats the lessons of the Latin American debt crisis 30 years ago – that ad hoc refinancing and piecemeal responses defined by the creditors simply do not solve debt crises. Not on a macro level and crucially not for the people.
A fair and independent debt work-out procedure where analysis and decision making is independent of creditors is needed to find fair and lasting solutions to debt problems, including holding creditors to account for reckless behaviour, by deeming them to take the losses that result from any reckless behaviour. Only by making lenders pay for reckless lending can we create incentives to behave prudent and responsible in the future.
Promoting transparency through debt audits and fair, lasting solutions through independent debt resolution procedures could pave the way for a genuine break with the failed economic policies of the past and lead to sound lending and borrowing in the future, that can also favour the poorest and support democratisation of political and social life.