Auditamos Grecia

Greek debt crises

admin — Sun, 20 Sep 2015 08:48:05 +0000

Greek debt crises: The European Stability Mechanism money started flowing – to creditors, not to Greece

8 September by Bodo Ellmers

The Greek bailout saga entered a new round as the first tranches of the new loan package were disbursed. The €86 billion programme will be funded by the European Stability Mechanism (ESM). The International Monetary Fund (IMF) refused to participate in the arrangements, due to doubts that the Eurogroup-negotiated programme is sustainable without a substantial reduction in the existing debt stock. For good reasons: the money will be used to refinance Greece’s unsustainable debt burden, and to recapitalise banks. While creditors can rest easy for a while, the Greek citizens and economy are once again sidelined.

Europe’s current finance ministers and heads of state should be relieved: The new ESM bailout package should delay Greece’s default and insolvency for a few years. Hopefully until their watch is over, and successors have to take the blame for writing off the many billions of taxpayer-guaranteed loans that will ultimately have to happen.

Where does all the money go?

On 20 August, the ESM money started to flow, after approval by several parliaments in the preceding days. However, the money did not go to Greece but to banks and creditors:

This is how the €86 billion from the third programme is expected to be used:

€54 billion to refinance old debts
€25 billion to recapitalise banks
€15 billion to clear payment arrears and rebuild reserves

The €8 billion gap between this €94 billion bailout package for Greece’s creditors and banks, and the €86 billion that the ESM might provide, is supposed to be funded by the Greek state: €2 billion from the regular budget and €6 billion from privatisation proceeds. This means that the programme is not only failing to finance economic recovery in Greece, the Greek contribution implies that more money is drained from the economy and public budgets in order to be transferred to creditors.

Entering the age of circular multi-level bailouts

A first payment of €13 billion was made on 20 August. €3.4 billion of this was used to repay the European Central Bank (ECB) (€3.2 billion principal plus €200 million in interest). The fact that the ESM started bailing out the ECB is a new quality and a Kafkaesque example of how EU institutions are playing ping-pong with fictitious money. And it is good business for the ECB and the states that own it too: the Committee for the Abolition of Third World Debt (CADTM) has published an excellent analysis explaining how the ECB made vulture-like profits on their Greek engagement.

The rest of the money will mainly be used to repay the EU’s €7.4 billion bridging loan that Greece has used to pay installments due to the IMF. I have argued before thatit would have been useful for IMF reform if Greece had defaulted on the IMF loans. This ESM-funded IMF bailout is also a new feature: Usually it is the IMF’s job to provide bailout loans when one of its members is short of cash, which it did overly generously in the case of Greece in previous years. Money that Greek governments – pushed by the Troika – primarily used to bail out private creditors and failed banks.

We have obviously entered the age of circular multi-level bailouts. It would be interesting to know if the IMF and ECB boards already had discussions about which of them will step in once the ESM is in trouble, which will sooner or later happen if the ESM continues to (re-)finance insolvent states.

Of the next ESM payment of €13 billion that is to be disbursed soon, the lion’s share (€10 billion) will be transferred to a blocked account in Luxemburg that is managed by the ESM, outside the control of democratic authorities. The payment is earmarked for the bank recapitalisation, i.e. bailout. This lack of democratic control has been criticised by Eurodad’s recent comments on the new programme’s onerous set of conditions. Eurodad member Global Justice Now has also released a blog on the crazy privatisation programme, and has included a list of assets that are due to be privatised. It is highly unlikely, however, that a new round of firesale privatisations will generate enough resources to bring Greece anywhere near sustainable debt levels, this is what insolvency is about.

So it comes down once again to a mixture of bank bailout programme and delayed filing of insolvency, i.e. new lending to refinance unsustainable old debts, rather than writing debts off once and for all. If Greece was a private cooperation, such a conscious delay would be a punishable crime. It demonstrates the EU needs a fair and orderly insolvency framework to come to a sustainable solution to the crisis.

Source : Eurodad

La entrada Greek debt crises aparece primero en Auditamos Grecia.

Zoe Konstantopoulou’s speech at the UN Headquarters in New York

admin — Thu, 10 Sep 2015 06:07:19 +0000

New York, 2 September by Zoe Konstantopoulou.

Zoe Konstantopoulou’s speech was given during the Fourth World Conference of Speakers of Parliament on 2^nd September in New York.

Sovereign debt is being used against the Greek population and the Hellenic Parliament to reduce Democracy. But Democracy is an ultimate value.

Ladies and gentlemen,
Speakers of the world’s Parliaments,

At this occasion of the 70^th anniversary of the UN,
Also marking 70 years from the end of World War II,

At this 4^th World Conference of the Inter-Parliamentary Union, on placing democracy at the service of peace, sustainable development and building the world that people want, I stand before you and among you, as President of the recently dissolved Hellenic Parliament to address you with a call for solidarity to the Greek people and to Greece: The place where democracy was born and where it is now being bluntly attacked and violated.

Greece and its people have been victimized during the last five years by policies purported to provide a sustainable solution to the country’s over-indebtment and a way out of the economic crisis.

These policies, contained in agreements called “Memoranda of Understanding” and concluded by the Greek governments and a trio of international institutions (namely the IMF, the EC and the ECB) known as the TROIKA and acting as Greece’s creditors, have resulted to severe violations of human rights, especially social rights, fundamental freedoms and the very rule of law.

What has been presented as “bail-out” loan agreements has resulted to misery, unemployment at unprecedented rates (72% among young women and 60% among young men), hundreds of thousands of young people emigrating, an explosion of suicides, the marginalization of the young, the old, the weak, the poor, the immigrants the refugees, half of the country’s children living under the poverty line, a situation amounting to a humanitarian crisis and documented in the UN Independent Experts’ on Debt and Human Rights reports and public statements, as well as in a series of international court decisions and findings.

On the 25^th of January 2015, only seven months ago, the Greek people through general elections gave a clear and unequivocal mandate to government and to parliament to do away with these homicidal policies. Negotiations started.

A special Committee of the Parliament was formed, called the Truth Committee on Public Debt, to conduct an audit and a legal assessment of the debt it issued a preliminary report last June.

The report found that the state’s sovereign debt is illegal, illegitimate, odious and unsustainable. It found that the sovereign debt has been concluded through procedures which grossly violate constitutional law, parliamentary procedure and fundamental human rights and freedoms guaranteed under international law, thereby justifying the denunciation of the debt. It found that creditors had been acting in bad faith, knowingly burdening the country with unsustainable loans to save French, German and Greek private banks.

Despite these findings, Greece’s creditors insisted that the people’s mandate be neglected.

On June 25^th, a 48 hour ultimatum was addressed to the Greek government asking it to accept, contrary to popular mandate, a series of measures dismantling labour law, abolishing social security guarantees and legal protection for over-indebted citizens, while at the same time requiring the sell-out of the most precious public assets and public enterprises, but also major ports, airports and public infrastructure.

All to be sold or given away to repay an unsustainable and odious debt.

The Hellenic Parliament, accepted the Government’s proposal to hold a referendum on the ultimatum, and the Greek people, through a large majority of 62%, rejected the measures.

During the referendum week, international and foreign government officials tried to influence the referendum outcome through statements terrorizing the people.

The referendum was held with the banks closed and capital controls imposed as a result for the ECB’s refusal to provide liquidity after the proclamation of the referendum.

And yet, democracy prevailed. The people pronounced themselves clearly and said a 62% NO to those homicidal measures.

What followed is a nightmare for every democratic conscience and a disgrace.

The creditors refused to consider the referendum outcome. They insisted, under the threat of provoking a bank-failure and a humanitarian disaster, that measures harsher than those rejected be adopted.

The government was forced to accept that Parliament legislates on pre-formulated texts of hundreds of pages with no deliberation and at pre-fixed dates with an emergency procedure and with the banks still closed. This extortion was baptized “prerequisites” for an agreement and Parliament was called to abolish laws it had only voted during the previous 4 months and to refrain from any legislative initiative without prior approval by the creditors.

An over 100 page law construed in 1 article was passed on July 15^th in less than 24 hours. A 1000 page law construed in 3 articles was passed on July 22^nd in less than 24 hours. An almost 400 page law was passed on August 14, in 24 hours.

Parliament legislated 3 times under duress and coercion.

And after this was done, attesting that a large part of the deputies of the major governing party, including the Parliament’s President, refused to vote such legislation, Parliament was inadvertedly dissolved to ensure a “more stable majority” to implement what the people have rejected.

Ladies and gentlemen,

Sovereign debt is being used against the Greek population and the Hellenic Parliament to reduce Democracy. But Democracy is an ultimate value.

And Parliaments cannot be reduced to simple stamps approving dictated norms, rejected by the people and construed to destroy societies and the next generations.

I call upon you as Parliamentarians of the world to support the claim for democracy and parliamentary sovereignty against debt-coercion.

And to support the initiatives of the UN General Assembly and the Ad Hoc Committee on Sovereign debt as well as the initiatives of the UN Independent Experts on debt and human rights.

Do not allow for democracy to be annihilated at the place where it was born.
Do not allow that any other Parliament be coerced to vote against the people’s will and against its’ deputies mandate.
Do not allow that human rights, human lives, human dignity and the most valuable UN principles be crushed to serve the banking system.

The world that people want cannot be built without the world’s people.

La entrada Zoe Konstantopoulou’s speech at the UN Headquarters in New York aparece primero en Auditamos Grecia.

Daniel Munevar: “Why I’ve Changed My Mind About Grexit”

admin — Mon, 27 Jul 2015 08:27:42 +0000

Posted by CADTM on 24 July by Daniel Munevar , Thomas Fazi

Daniel Munevar is a 30-year-old post-Keynesian economist from Bogotá, Colombia. From March to July 2015 he worked as a close aide to former Greek finance minister Yanis Varoufakis, advising him on issues of fiscal policy and debt sustainability. He was previously fiscal advisor to the Ministry of Finance of Colombia and special advisor on Foreign Direct Investment for the Ministry of Foreign Affairs of Ecuador. He is considered to be one of the foremost figures in the study of Latin American public debt. Here he talks to Thomas Fazi about the latest bailout deal, explaining why the events of the past few weeks have made him change his mind about Grexit.

What do you make of the latest bailout agreed between Greece and its creditors?

Well, first of all it’s still not clear that there will be an actual agreement – there are several parliaments that need to approve their country’s participation in an ESM bailout. And even if they somehow reach an agreement, there is simply no way it can work. The economics of the program are just insane. They haven’t announced the precise fiscal targets yet, but if we look at the Debt Sustainability Analyses (DSAs) published by the IMF and the Commission, they both state that the target should be a 3.5% primary surplus in the medium term. But if you look at what has happened over the course of the past five years, Greece has managed to ‘improve’ its structural balance by 19 points of GDP. During that same time, GDP has collapsed by about 20% – that’s an almost one-to-one relation. So if you start from -1% – which is the general assumption for this year – to make it to 3.5 means you need an adjustment of over 4% of GDP, which means GDP will collapse by another 4 points between now and 2018.

This brings us to another point, which is that the current agreement is just a taste of things to come. The final Memorandum of Understanding (MoU) is definitely going to contain much harsher austerity measure than the ones currently on the table, to offset the drop in GDP that we have witnessed in the past months as a result of the standoff with the creditors. The problem is that these Memorandums are turning Greece into a debt colony: you’re basically creating a set of rules which, as the government misses its fiscal targets – knowing for a fact that it will –, will force the government to keep retrenching even more, which will cause GDP to collapse even further, which will mean even more austerity, etc. It’s a never-ending vicious circle.

This underscores one of the core problems of this whole situation: i.e., that the institutions have always disentangled the fiscal targets from the debt sustainability analyses. The logic of having debt relief is that it allows you to basically have lower fiscal targets and distribute over time the impa

ct of fiscal consolidation. But in Greece’s case, even if there is debt relief on the scale that they are suggesting – which is unlikely – Greece will still have to implement massive consolidation, on top of everything that has been already done.

At least debt relief is being openly discussed now…

Yes, that’s a good thing. But the creditors have known all along what the IMF has only recently admitted: i.e., that Greece was/is insolvent and that its debt was/is unsustainable. The IMF’s latest DSA is very clear on that point. But previous non-published DSAs all said pretty much the same thing: Greek debt was/is fundamentally unsustainable. But the Europeans never agreed to that, even though it was clear to everyone that without debt restructuring – and, importantly, without tying this to lower fiscal targets – there was never going to be a sustainable deal. Only now is the issue starting to be openly debated and that is partly because the situation has gotten so bad that it can’t be ignored any more, and partly because, when the risk of Greece exiting the euro became evident, the US started putting pressure on the IMF to put pressure on Europe on the issue of debt restructuring.

Speaking of Grexit, isn’t it somewhat contradictory

that Germany opposes debt relief but is willing to contemplate a solution that would almost certainly cause Greece to default on its external debts – meaning that Germany would lose all the money it is owed?

If you look at this in purely economic terms, yes. It doesn’t make sense. But this whole drama was never about economics, or about Germany not losing any money. We are talking of a German exposure of about 80 billion euros, after all – peanuts, in the larger scheme of things. This is about making an example out of SYRIZA and setting an example for the rest of Europe. Everything that has happened over the past months was simply a way of telling the people of Europe: ‘Look, you shouldn’t vote for parties that have this type of agenda because we will crush you. This is what happens when someone doesn’t follow the rules or refuses to pay the bills. It’s either austerity or you’re out’. Tsipras said it clearly – that he signed the deal with a knife to his throat. This was Schäuble’s argument for Grexit: if the Greeks don’t want to pay, let’s kick them out, watch them suffer, and then use that as a catalyst to put the fear of God into all other indebted nations.

Was the Greek government aware right from the beginning that the creditors were not willing to budge on the issue of debt relief?

Yes, but Varoufakis’ position was that Greece should nonetheless fight to get a deal that made economic sense – i.e., one that included debt relief and sustainable fiscal targets. But, as he explained in his interview to the New Statesman, all along he was working under a collegial decision-making system where he was always in the minority. So his actual capacity to do things was quite limited. The point is that the majority of Tsipras’ inner circle sincerely believed that if Greece made concessions, it would be able to achieve a good deal. Which is why after the Riga Eurogroup, Tsipras essentially sidelined Varoufakis and decided to start making concessions to see if that would work. This has been the position of the government in the last months. If you compare the proposals from March with the ones that are now on the table, there has been a complete turnover for the worse. And that is because these people believed that through concessions they could get a good agreement – which is a

lso why, up until the referendum, debt relief wasn’t even on the table. But of course it didn’t work, because the creditors were not willing to give Greece anything that it could claim as a political victory.

Do you think it would have been better for the Greek government to stick to Varoufakis’ debt-relief-or-nothing strategy?

In all honesty, it’s hard to see how things could have gone differently. The Greeks had no money and no power. The only weapons they could bring to the negotiating table were reason, logic and European solidarity. But apparently we will live in a Europe were none of those things mean anything.

So both strategies – Varoufakis’ and Tsipras’ – were bound to fail from the start?

Yes, it was a trap. Every time the European institutions faced a challenge from a national government in the past they resorted to threats – raising the interest rates of government bonds, threatening to shut down the banking system, etc. – to bring it back into line. And in the past these threats had always worked: the governments always backed down. And they assumed that with SYRIZA it was going to b

e the same. But Greece didn’t back down. Which is why the institutions reacted in such a vicious manner.

Do you think the introduction of IOUs – as suggested both by Varoufakis and by Schäuble – was a viable alternative for Greece?

The problem is that once you start introducing IOUs to pay salaries and pensions, you end up going down a slippery slope, because people are going to assume that this is the first step towards actually leaving the euro, so they will adjust accordingly and hoard available euros. As a consequence, economic activity would decline even further and a higher share of tax revenues would need to be denominated in IOUs. This in turn would force the government to issue even more IOUs to cover its funding. So you would basically find yourself in a self-fulfilling cycle, which would eventually lead to a de facto exit.

This is why the Greek government refused to use this financing method, because the risk of starting a process from which you cannot come back is real. Look at what is alread

y happening now, with Greek banking deposits: in a sense Greece is already one step out of the euro, because it’s in a situation in which the deposits in the bank accounts are not trading at par, meaning that one euro in the banking system is effectively worth less than a euro in cash. This is because the simple talk of exit has created a risk differential between cash and deposits, since it’s the deposits that would get converted into drachmas in the case of an exit. This is why a lot of businesses in Athens are not willing to accept electronic transactions. With IOUs it would very likely be the same: you would put in motion a self-fulfilling mechanism that could easily lead to an exit, regardless of whether the government wants it or not.

Which is probably exactly what Schäuble was hoping for…

Exactly. And in the end he will probably get what he wants – i.e., a Grexit –, because this deal doesn’t solve anything. Not for Greece, not for the eurozone. It actually makes the underlying problems even worse. As I said earlier, even if you provide all the debt relief that is on the table, if that’s not connected to lower fiscal targets you’re still going down the path of contraction. Which means that it’s only a m

atter of time before the Greek economy goes off the rails and the whole discussion about Grexit comes back to the fore.

Do you think that Greece should opt out of the euro?

Look, I’ve always been against Grexit – like Varoufakis. But now, as a result of the bailout agreement, Greece is a situation where the costs of staying in the euro have gone up so much that it’s possible to establish that there is a trade-off between going out – and facing all of the short-term costs of leaving the euro – versus staying in a circumstance where you are forced to renounce your sovereignty without getting any economic relief in exchange. I think that Tsipras has made up his mind on this issue and has concluded that the best thing for Greece is to stay in the euro, regardless of the costs. And it’s a respectable decision. But once you start assessing the economic logic and everything that has happened, you can’t but conclude that Greece has no future in the euro.

So this deal simply

postpones the inevitable. Because it’s clear at this point that there is not enough political will in the eurozone to fix the structural problems of the euro. Which, interestingly, is exactly what the IMF is implying in its latest DSA, which essentially states: either you do a haircut or you establish a system of transfers for Greece – in other words, you create a federal Europe. We all know that this is the original sin of the euro: to have established a common currency without a system of common transfers. But there is no will to fix it. So we might as well accept that it doesn’t work. This shouldn’t be a taboo in Europe anymore after what happened in Greece.

Where does Varoufakis go from here?

Well, based on his ‘no’ vote in the parliament, it would seem that he is de facto positioning himself to the left of Tsipras, which could eventually translate into an actual political alternative. So look out for that.

La entrada Daniel Munevar: “Why I’ve Changed My Mind About Grexit” aparece primero en Auditamos Grecia.

Comments on the latest Greek proposals by Wolfgang Schäuble

admin — Sun, 12 Jul 2015 16:21:44 +0000

In order to stay in the Eurozone, the Greek Prime Minister Alexis Tsipras accepted to make almost the same proposals that were rejected during the Greek Bailout Referendum of 25 June 2015. In spite of this, these are the comments of the Minister of Finance of Germany, Wolfgang Schäuble, to the proposal of the Greek government.

On 9 July 2015 Greece has submitted a list of proposals. These proposals are based on and even fall behind the latest aide memoire that was drafted by the Troika to conclude the review under EFSF. However Greece was notable to conclude the review.

These proposals lack a number of paramount important reform areas to modernize the country, to foster long term economic growth and sustainable development. Among these, labour market reform, reform of public sector, privatisations, banking sector, structural reforms are not sufficient.

This is why these proposals can not build the basis for a completely new, three year ESM program, as requested by Greece. We need a better, a sustainable solution, keeping the IMF on board. There are 2 avenues now:

1. The Greek authorities improve their proposals rapidly and significantly, with full backing by their Parliament. The improvements must rebuild confidence, ensure debt sustainability upfront and the successful implementation of the program – so as to ensure regained market access after completion of the program. Improvements include:

a) transfer of valuable Greek assets of [50 bn] Euros to an external fund like the Institution for Growth in Luxembourg, to be privatized over time and decrease debt; b) capacity-building and depolitizising Greek administrative tasks under hospices of the COM for proper implementation of the program; c) automatic spending cuts in case of missing deficit targets.

In parallel, a set of financing elements would be put together to bridge the time gap until a first disbursement under the enhanced program could be made. This means the existing risk of not concluding a new ESM program should rest with Greece, not with Eurozone countries.

2. In case, debt sustainability and a credible implementation perspective can not be ensured upfront, Greece should be offered swift negotiations on a time-out from the Eurozone, with possible debt restructuring, if necessary, in a Paris Club – like format over at least the next 5 years. Only this way forward could allow for sufficient debt restructuring, which would not be in line with the membership in a monetary union (Art. 125 TFEU).

The time-out solution should be accompanied by supporting Greece as an EU member and the Greek people with growth enhancing, humanitarian and technical assistance over the next years. The timeout solution should also be accompanied by streamlining all pillars of the Economic and Monetary Union and concrete measures to strengthen the governance of the Eurozone.

You can download the document HERE

grexit_bundesregierung_non_paper_10_juli_2015

La entrada Comments on the latest Greek proposals by Wolfgang Schäuble aparece primero en Auditamos Grecia.

How would Varoufakis’s negotiations have turned out without Zoe Konstantopoulou?

admin — Fri, 10 Jul 2015 05:04:50 +0000

By Julia, PACD collaborator

The Debt Audit gamble is key to understanding the outcome in Greece

The media, with their chauvinist and neoliberal stereotypes, have focused almost exclusively on Varoufakis to explain what was happening in Greece. It is always easier to build a myth than try to explain the complexities of the situation and this becomes even truer if they make things easy for you and choose a bloke with a reputation for being tough as their Finance Minister. And, despite the subversive situation where, for the first time ever in Europe, we are seeing a Prime Minister and a Minister stand up to the dictates of the troika, this is how the media have managed to create a picture that fits their dominant values. Here is a great man, a leading expert, and he alone will succeed in changing the situation. But should he fail, then there is nothing that anyone can do.

But the situation is obviously much more complex and the stance taken by Tsipras and Varoufakis cannot be explained without acknowledging the level of outcry and mobilization that Greece has seen in recent years as well as Syriza’s own evolution since previous elections. Moreover, there are nuances within the Syriza government itself, with various actors playing distinct roles. Against this backdrop it was no accident that whilst the Eurogroup was delivering its ultimatum in Brussels, Athens was issuing the Truth Committee’s preliminary report on Greek public debt.

The truth committee, headed by Éric Toussaint, came to the firm conclusion that “Greece should not pay this debt because it is illegal, illegitimate and odious”

The truth committee, headed by Éric Toussaint, came to the firm conclusion that “Greece should not pay this debt because it is illegal, illegitimate and odious”. The report also condemned the structural adjustment plans for causing a debt which is a “direct infringement on the fundamental human rights of the residents of Greece”. The report was, therefore, clear in its assessment that those responsible for the situation in Greece are not its residents but certain politically-motivated economic measures for the benefit big business. It also made clear that the Greek debt is unpayable and that the consequences of continuing to apply austerity could be disastrous. With this report on the table, it became increasingly difficult for the Greek government to give in.

We can, therefore, say that the strategic move by Zoe Kostantopoulou, speaker of the Greek parliament, in establishing the truth committee was key in the way events unfolded. Diego Borja, a member of that committee and former Ecuadorian minister, has pointed out that the international media have not given the report much attention but even so, its publication has influenced negotiations in so far as it has ensured that the condemnation of the debt mechanisms, the consequences of austerity and the need to default on the debt, all of which had been swept under the carpet during negotiations, once again took center stage.

The Greek example shows us yet again the clout that debt audits can have

The Greek example shows us yet again the clout that debt audits can have – as was the case in Ecuador, where the debt audit legitimized relief of 70% of the debt, allowing resources to be freed up for basic services like education and health. Establishing the illegitimacy or illegality of the debt through an audit, therefore, enables you to deal with your creditors from a position of strength, shift the role of victim and condemn those responsible. At the same time, debt audits act as a political and economic educational tool as they provide the whole population with information about the criticisms of the neoliberal economic system and its consequences, thereby turning the neoliberal debate that seeks to create personal responsibility for structural inequalities on its head.

We advocate citizen audits at the Spanish Citizen Debt Audit Platform (PACD). Citizen audits can have an even greater impact given their potential to empower citizens, legitimize the process and dismantle the neoliberal economic model at a grassroots level.

In this regard, it is important to acknowledge that a debt audit will have much greater impact if it is undertaken by a large proportion of the population and this is the reason why we advocate citizen audits at the Spanish Citizen Debt Audit Platform (PACD). Citizen audits can have an even greater impact given their potential to empower citizens, legitimize the process and dismantle the neoliberal economic model at a grassroots level. It is always easier to mobilize against consequences than causes and this makes building a powerful anti-debt movement difficult but the example of Greece shows us how necessary it is to build a strong movement in the face of debt. A movement which condemns debt’s causes and consequences and which strongly defends the need for “non-payment” as a crucial element in regaining national sovereignty and rights.

La entrada How would Varoufakis’s negotiations have turned out without Zoe Konstantopoulou? aparece primero en Auditamos Grecia.

European democracy is being played out in Greece

admin — Thu, 09 Jul 2015 18:29:09 +0000

By Diego Borja Cornejo*

The Greek Prime Minister, Alexis Tsipras, has called a referendum so that it will be up to the Greek people to decide if the austerity demanded by the Eurogroup is to continue.

Tsipras took this decision after several months of negotiating with a European Union, a European Central Bank and an International Monetary Fund which have, in recent months, rejected time and time again the Greek proposal to reach a compromise that is acceptable to a government that won the elections on a platform to limit austerity.

The Greek parliament has approved the call for a referendum and given the Prime Minister its backing and now Tsipras has turned to the Greek people so that they can decide if continuing austerity, which has been a noose strangling both the population’s welfare and economic growth, is an option they can accept.

The leaders of “democratic” Europe wasted no time in furiously criticising his decision. In a blatant contradiction, across Europe the governing establishment, whether conservative, liberal and “socialist”, spoke in the name of “democracy and responsibility” and launched an attack on Tsipras’s essentially democratic action of appealing to the people.

Europe’s democracy is being played out in Greece. The top bureaucrats at the institutions, with a stubbornness that can only come from clearly seeing themselves as guardians of power and financial capital, are not budging one inch in their demands regarding the tried-and-tested austerity, which has been a social and economic disaster for Greece. As stated in the Preliminary Report by the Greek Debt Truth Committee, set up by the speaker of the Greek parliament, Zoe Konstantopoulou, the austerity policies have had a dramatic impact on investment. Gross capital formation fell by 65% in 2014 compared with 2008 and labour productivity by 7%. The capital capacity utilisation rate dropped from 75.5% in the period between 2006 and 2010 to 67.7% in 2014.

Gross Domestic Product has fallen by 27% in the last 5 years. Workers’ real salaries were 17.2% lower in 2014 compared with 2009. The wage share in income fell from 60.1% in 2010 to 55.1% in 2013. Between 2008 and 2013, unemployment rose from 7.3% to 27.9%. Youth unemployment reached the scary figure of 64.9% in May 2013. Currently, 23.1% of the population live below the poverty line and 63.3% have become poorer as a result of the austerity policies. In 2013, 34% of children were at risk of poverty or social exclusion. The poorest 10% of the population lost 56.6% of their income. Pensions for retired workers fell by 40% on average, with the result that 45% of pensioners now live below the poverty line.

Nobel economics prize winner Paul Krugman clearly stated that “what we have heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes.”[1] All this would have been enough to meet the rigid IMF demand to run a large fiscal surplus.[2] However, this simply has not happened because austerity was dragging down revenues at the same time as it was dragging down the economy.

It is obvious that austerity is not an option for Greece and it is, therefore, becoming increasingly clear that what is actually happening in these negotiations has little to do with the economy and the debt but a great deal to do with power and politics.

The pressure being placed on Greece by the Eurogroup and the institutions is looking more like a war on the Syriza government. To wage this war, they are using all the weapons they have at their disposal, such as the ECB’s decision not to increase emergency credit to Greek banks through the ELA mechanism. This decision runs counter to the very nature of the ECB as its statutes explicitly state that its job is to contribute to the financial stability of the EU member states. Alongside the propaganda of fear, which is trying to position the idea that there is no life outside the euro into the consciousness of European citizens, it is this ECB decision which has contributed to the massive wave of deposit withdrawals by bank account holders in Greece in recent days. And onto this fire of fear, which has already become ingrained in the public consciousness, the media powers are pouring fuel by reporting news stories like those saying that on Saturday 27 June alone, more than 500 million euros were withdrawn from the Greek financial system. And that is on top of the capital flight being led by the big money holders.

Despite the same old story coming out of the European establishment about the Greek government’s lack of responsibility, the authorities, in a show of considerable pragmatism and responsibility, imposed capital controls in Greece on Sunday 28 June.

The media channels in Europe immediately started to talk about a Greek “bank freeze”. However, unlike the freezing of bank accounts in Ecuador in 1999 and in Argentina in 2001, the Greek measure is not geared to protecting the bankers’ wealth but rather to avoiding a bank run, which was already being celebrated by certain conservative voices in Europe. Moreover, this measure allows a daily withdrawal of 60 euros per individual bank account, the unrestricted use of credit cards and any electronic payments within Greece. What it does restrict is the capital flight via foreign transfers, which would have led to a bank run and a monetary crisis had this measure not been taken.

Moreover, this is a measure that has been put in place on a temporary basis until 6 July, one day after the decision that the Greek people will be making in the 5 July Referendum.

However, the fears caused by people not being able to access, even temporarily, the money they have in the banks are being amplified by the voices in the media, who are trying to show that it is all due to the incompetence of the Syriza “populists”. Spain’s conservative Prime Minister, Mariano Rajoy, has pointed out in his various TV addresses to Spanish viewers that “here you have the evidence for the proposals of people like Podemos and Syriza”. Rajoy did not hesitate to convey what lies at the heart of the Eurogroup’s “stubbornness” that Greece should keep austerity in place, namely the desire to punish Syriza and its voters and to intimidate those, like Podemos in Spain, who might think that there are any democratic political alternatives in Europe. To this end, the establishment is doing all that it can to drive Greek voters towards suicide, which is what a yes to austerity vote would be.

“A yes vote would mean depression almost without end,” the Nobel economics prize winner Joseph Stiglitz said. By contrast, a no vote “would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands. Greeks might gain the opportunity to shape a future that, although perhaps not as prosperous as the past, is far more hopeful than the unconscionable torture of the present,” the economist added, almost poetically.[3]

The Preliminary Report by the Greek Debt Truth Committee has shown quite clearly the illegal, illegitimate and odious nature of Greek debt. It has shown that the debt was essentially used to transfer the high-risk Greek debt from the banks – with most of the debt being held by French and German banks – over to the public institutions, i.e. the European Financial Stability Facility and the European Central Bank. It has shown that the Greek Budget only received 10% of the loans received between 2010 and 2015 whilst the remaining funds were used for buybacks and capitalisations, which benefited the private creditors from 2010 and 2012. It has highlighted the fact that the IMF “misjudgements” in its predictions and calculations were convenient and opportune for these transactions, which benefited financial capital at the expense of millions of citizens. It has revealed the illegality of several of the mechanisms used, as not only did they violate Greek laws and regulations but also those of the European Union and other participant countries.

There is enough support to ensure that that Tsipras’s brave decision to call for the people to decide the future of the negotiations in a referendum is being backed up by legal action. Such a move could see those very authorities, which are currently driving Greeks to suicide by calling for a yes vote and threatening that “otherwise they’ll be thrown out of the euro”, being put in the dock at the European Courts, where they would be confronted by their own regulations.

These are crucial days for Europe. When the Spanish people went to war to fight for democracy and freedom between 1936 and 1939, western democracies turned a blind eye and the price that Europe then paid was Nazism and fascism, with the war and oppression that followed. Times are different now but history is condensed today into events in Greece. The battle for social justice and democracy that is being waged there is the battle for an integrated Europe that is based on these premises and not on the neoliberal doctrine and the interests of financial capital.

* Ecuadorian economist, Masters in Economics from Leuven University (Belgium), Ex-Finance Minister, Ex-Minister for Economic Policy, Ex-President of the Central Bank of Ecuador, Ex-Economic Secretary at ALBA, Montecristi Constituent Assembly member, President of the Citizen Power Movement. Member of the Greek debt truth committee, established by Hellenic Parliament Speaker, Zoe Konstantopoulou, on 7 April 2015.

[1] http://economia.elpais.com/economia/2015/06/29/actualidad/1435594467_652647.html (English original: http://www.nytimes.com/2015/06/29/opinion/paul-krugman-greece-over-the-brink.html)

[2] The troika continues to demand that Greece achieve a primary fiscal surplus (excluding debt interest payments) of 3.5% of GDP by 2018.

[3] http://www.theguardian.com/business/2015/jun/29/joseph-stiglitz-how-i-would-vote-in-the-greek-referendum

La entrada European democracy is being played out in Greece aparece primero en Auditamos Grecia.

Greek Proposal for Third Bailout

admin — Wed, 08 Jul 2015 15:22:53 +0000

Today, July the 8th Greece has introduced a new proposal for an agreement for its third bailout, in the European Parliament. It would be a 3 years stability bond, that would be used to pay their compromises to all creditors. There are no details, and it does mention neither debt relief nor restructuring.

La entrada Greek Proposal for Third Bailout aparece primero en Auditamos Grecia.

Eric Toussaint’s statement on the beautiful historic victory of the No in Greece

admin — Tue, 07 Jul 2015 09:38:59 +0000

The beautiful historic victory of the No shows again that the Greek citizens refuse to accept the creditors’ blackmail. As shown in the preliminary report by the Truth Committee on Public Debt created by the Hellenic parliament, there are several legal arguments that permit a State to unilaterally suspend or repudiate its illegal, odious, and illegitimate debt.

In the Greek case, such a unilateral act may be based on the following arguments:

the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights;
preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika;
coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution;
and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors, which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights.

As far as unsustainable debt is concerned, every state is legally entitled to invoke necessity in exceptional situations in order to safeguard those essential interests threatened by a grave and imminent peril.

In such a situation, the State may be dispensed from the fulfilment of those international obligations that increase the peril, as is the case with outstanding loan contracts. Finally, states have the right to declare themselves unilaterally insolvent when the servicing of their debt is unsustainable, in which case they commit no wrongful act and hence bear no liability.

People’s dignity is worth more than illegal, illegitimate, odious and unsustainable debt.

Eric Toussaint

Scientific coordinator of the Truth Committee on Public Debt (Greece)
Vocal of the CADTM international network www.cadtm.org

La entrada Eric Toussaint’s statement on the beautiful historic victory of the No in Greece aparece primero en Auditamos Grecia.

Minister No More!

admin — Mon, 06 Jul 2015 15:24:08 +0000

This post was originally published in Yanis Varoufakis’ Blog

The referendum of 5^th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

And I shall wear the creditors’ loathing with pride.

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

La entrada Minister No More! aparece primero en Auditamos Grecia.

Statement of the Eurogroup President following the referendum in Greece

admin — Mon, 06 Jul 2015 15:02:51 +0000

05/07/2015, 23:30 – Press release 556/15 – Euro area: Economy & finance

I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece. For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July.

Jeroen Dijsselbloem

Download official statement HERE

Eurogroup1

La entrada Statement of the Eurogroup President following the referendum in Greece aparece primero en Auditamos Grecia.