Eric Toussaint is one of the most prominent cadre of the anti-globalization movement; historian and political scientist, president of the Committee for the Abolition of Third World Debt (CADTM), member of the association ATTAC and of the international council of the World Social Forum. He has authored several books on the issue of debt, the latest of which deals specifically with the role of the IMF and World Bank.
He has also been a member of the Audit Committee set up by the president of Ecuador, Rafael Correa, in order to avoid a large proportion of Ecuador’s public debt.
In Ecuador, the debt audit helped delete $3.2 billion
The effort was successful: Ecuador unilaterally eliminated as illegitimate (“illegal” or “odious”) - a debt of 3.2 billion dollars. Despite the embargo of the markets, the consequences for Ecuador have not been tragic. On the contrary, the economy grew by 3.7% in 2010 and is expected to grow by 5% in 2011.
The Committee’s work in Ecuador has recently been mentioned in the Greek Parliament by Sofia Sakorafa. But could the experience of Ecuador be helpful in Greece? Eric Toussaint thinks so: "While the economies of the two countries are different, the structure of Greek public debt has a lot in common with developing countries.
First, Greece is financing a part of debt in the form of bonds by the Government authorities (“securitization of public debt”), a technique used by Ecuador.
Second, another large part of the Greek debt is in the form of bank loans, which is also the case for developing countries.
Third, as a result of the rescue plan in May 2010, Greece has borrowed from the IMF.
In other words, what is happening in Greece today is not something different from what has happened in many developing countries in recent decades, namely, through the IMF-imposed “Washington consensus”."
Mr. Toussaint sees another common element: “Ecuador’s debt was mainly owed to the banks in the U.S. Ecuador abandoned in 2000 its national currency and adopted the U.S. currency that is the currency of its lender. Similarly Greece has the same currency with its own lenders, such as France and Germany.”
The last observation does not mean that defaulting on the debt will necessarily be accompanied by exit from the euro: “There is not an automatic exit from the eurozone if Greece is to stop paying. Greece will have to decide if it wants to remain in the eurozone after a dialogue in the Parliament and with the Greek people.”
For Mr. Toussaint, wages, pensions and savings can be secured. “If a state refuses to repay the debt, it saves money. In order to repay the debt, the state is using a very high volume of government spending money that could be used in order to pay salaries, to build public hospitals, schools and public agencies, to act to ensure the security of the country. The states that have defaulted up to now have realized that this has improved their ability to meet their obligations with respect to their citizens.”
Also, considering citizens’ deposits, “the public authority must take responsibility and create a large public financial sector. The state can cover the cost of strengthening the banking system, by using the assets of the major banks’ shareholders.”
Domino effect
Although the reasons that led to the debt increase are different in Greece, Mr. Toussaint insists that the debt is not an issue that is only concerning Greece. “Greeks have to understand that they are not the exception to the rule. What has happened in Greece since April 2010 was repeated in Ireland in October 2010, it will happen again in Portugal, Spain and Italy. It would really be a shame for the Greeks to believe that they are an exception and to fatally accept the terms imposed on them.”
Argentina – Russia. The default has saved them
As a witness in defense of his claim for defaulting on odious debts, Eric Toussaint refers to the Nobel laureate economist J. Stiglitz, who in a 2010 study revealed that the economies of countries such as Russia or Argentina have been in a better financial situation since defaulting and have been able to save money to boost growth.
Playing dirty. Foreign banks to take responsibility
For Mr. Toussaint, Eurobonds are not a solution to our problem. First and foremost, he believes that the conditions for granting loans in Greece should be explored.
The question that we should primarily answer is: “Is it normal for citizens of a country like Greece, to repay a debt that is not legitimate?” If the loans had been made in the interests of citizens with respect for their basic needs and if the banks, mostly French and German, had acted carefully and rationally, then we would say that the debt should be repaid. But the bulk of debt is illegal and the bankers who purchased Greek titles must take their responsibilities. They have entered into loan agreements with unreasonable and illegal terms, and therefore they must accept the cancellation of a significant part of the debt.
Mr. Toussaint characteristically refers to the “excessive military spending in Greece, many of which are due to Franco-German pressure.”