Citizens standing up against unfair debt
By Carlos Villota,
Two years after the Greek debt crisis first appeared in headlines across the globe, policy makers in Europe are still failing to deal soundly with the crisis. Inspired by the Jubilee movement that has long fought for debt justice in the South; a wave of mobilisation has taken place with, debt campaigners standing up across Europe. Campaigners demand transparency, justice and protection of citizens’ rights against the consequences of financial market failures.
The debt problems in Greece, Ireland, Portugal, Spain and Italy are of different nature, but the remedies are largely the same: Cuts are imposed on the most basic of the State's social functions, justified with the need to finance public debt service and not lose further trust from financial markets. The conditions imposed on already over-stretched governments often push economic policies, such as privatisation of public enterprises. The remedy is not only imposed, thus violating basic principles of democracy when parliaments are sidelined and national governments are largely made puppets steered from Frankfurt (the European Central Bank) and Brussels (the European Commission), but also has serious negative effects on the citizens of the indebted countries.
For instance, in the case of Greece, cuts and austerity measures have driven more than one out of four (27.7%) citizens under the poverty line according to data from the European statistics office. Policy measures have included 150,000 public sector lay-offs, an axing of pensions for many public employees and a 22% reduction in the national minimum wage. According to Eurostat, the number of unemployed people, meanwhile, equates to an average rate of about 20 per cent across the population and among youth (under 25), close to 50 percent.
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 Europe, citizens are standing up to demand real democracy ensuring that their rights and wellbeing have the priority over speculative financial markets and unfair public debts. Several campaigns are taking place all over Europe
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 Ireland published a debt audit report, presenting an in-depth study of the Irish debt. The audit revealed that Ireland’s debt repayments for the now dead Anglo-Irish Bank will reach over €47.9 billion (That is 30% of Ireland’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.
- 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, Italy and France.
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.