A group of some 200 academics, economists, MEPs and other notables have issued a call for an audit of Greek debt, a demand that may be raised in the Greek parliament in the coming days and which has also been quickly embraced by Irish trade unions and development NGOs regarding Dublin’s public borrowing. Last night Greece was granted a 1% rate cut on its EUR 110 billion loan – Ireland was not.
“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.”
The group, which 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.
An audit commission, composed of public auditors, economists, lawyers and other specialists, as well as representatives of civil society and organised labour, would 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.
“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,” Jubilee Debt Campaign director Nick Dearden says.
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 euro zone 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 euro zone 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”.
I hereby introduce the term : “Too Stressed To Test” as a substitute for “Too Big To Fail”
Greece Gets Rate Cut
In spite of the growing scepticism towards the Greek debt, the King of the PIIGS, was granted a 1% rate cut last night by the EU commission and an extension of the payment period from the current three and a half years to seven and a half.
Ireland was offered a similar reduction, but the country’s new prime minister says he could not accept the terms demanded.
“It was impossible to reach a deal for Ireland this evening,” Taoiseach Enda Kenny told reporters after an acrimonious seven-hour meeting of euro zone premiers and presidents in Brussels on Friday, according to the EUobserver.com.
“I wasn’t prepared to contemplate a common euro zone tax base,” he continued, adding that Ireland still intends to be “constructive” about discussions about EU tax policy as contained in a ‘euro pact’ agreed by leaders early Saturday morning, but that was as far as Dublin was willing to go.
He said that Ireland had been asked “to make a reference to our corporate tax rate.”
Referring to an angry confrontation between Kenny and French President Nicolas Sarkozy over corporate taxes, he said: “France has had very strong views on corporate tax rates for quite some time, but then so do I.”
Saying that Ireland unlike Greece had not asked for a loan extension, insisting: “This country wants to pay its way. We seek no evasion of our responsibilities.”
“It will be difficult” to continue the discussions, he adds, “but I am convinced we can find a way.”
Sarkozy for his part noted that the issue is “very sensitive for our Irish friends.”
“There is a discussion that is progressing in one way or another … but there is no certainty,” he continues, asking for “at least a gesture.”
In return for Greece’s concessions, Athens has committed to a detailed fire-sale privatisation programme worth some €50 billion.
A nice Greek island, anyone?
(Real cheep, too!)
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- Brussels Tells Athens To Shut Up And Take The Pain
- Greece About To Enter The Death Spiral
- Desperation Gets A Grip: Greece Puts Islands Up For Sale
- Support the campaign to audit Europe’s public debt | Costas Lapavitsas (guardian.co.uk)
- Euro Leaders Retool Aid Fund, Cut Greek Rescue-Loan Rates (businessweek.com)
- Eurozone to agree laws on debt limits in bailout deal (guardian.co.uk)
- EU Leaders Back Merkel Economy Pact as Crisis Endgame Nears (businessweek.com)
- Merkel and Sarkozy to Kenny : agree to change the Irish corporate tax rate/base by 25th March or we won’t reduce your interest rate (namawinelake.wordpress.com)