Debt and austerity – from the global South to Europe

Summary of a global gathering in Athens

13 May 2011 | Note

In early May, more than 400 activists in Greece and campaigners and academics from across the world met in Athens to confront the current debt crisis of the European periphery and plan international solidarity and coordinated action against fiscal austerity imposed by governments. The global gathering’s programme (EN, GR) opened space for discussion among participants for the transfer of knowledge and experience on dealing with debt crises and for learning strategic lessons from countries in the global South. The meeting created a strong mobilisation in Greece aiming at mounting political pressure for an independent debt audit commission and financial reform in Greece, and a push for similar calls for debt justice in other European debtor states.

The opening speech was given by Sofia Sakoraka, an independent MP in Greece and member of the Greek initiative for a debt audit.

The conference started with an in-depth look at the European situation. During the first session, The reality of the crisis in Greece, speakers Leonidas Vatikiotis, Nadia Valavani, Xristos Papatheodorou, and Notis Marias analysed the causes and the nature of the debt crisis in Greece as well as the impacts it is having on people. Themes included the flow of Greece’s public investment to big businesses, large scale privatisation, the highest military expenditure in Europe as well as the global financial crisis and Greece’s participation in the eurozone. They argued that the current crisis will shift power from labour to capital. It was made clear that obedience to international organisations rather than to public will is also eroding democratic principles.

The session Debt in Europe – Key players and current politics discussed impacts and views of the crisis in other European contexts, as well as European political response to the crisis and to the impacts of the new European Union/ European Central Bank/ International Monetary Fund combination of lenders. Panellists Andy Storey from Ireland, Denis Durand from France, Andrej Hunko from Germany and Darius Zalega from Poland presented the current reality of tackling debt, lending levels and policy conditionality trends in their countries. The Irish experience stressed again the power shift from labour to capital. Iceland, where a public referendum rejected paying back private debt with public money, was pointed put as an example that a different solution to debt crises is possible.

After taking stock of the situation in Europe, focus shifted to international experiences. In the session The global problem of debt:  debt crises in the global South, speakers Lidy Nacpil from the Philippines, Mimoun Rahmani from Morocco, Fathi Chamki from Tunisia, and Nick Dearden from the UK, presented the roots and current situation of the debt crises in the South, including specific country cases, the role of the IMF, and the links between debt and tax justice in Northern and Southern countries. The internationally applied definition of debt sustainability was highlighted as hugely problematic and the presentations challenged an international economic system that punished deficit countries, while surplus countries are not held responsible. The analysis thus also stressed that debt cancellation alone will not solve the problem until the global economic structure changes.

Speakers Oscar Ugarteche from Mexico and Alan Cibils from Argentina discussed alternatives for how to react to current and future debt crises, including illegitimate debt, during the session Alternatives for dealing with debt – international lessons. The policy options of default, restructuring and repudiation were analysed with regard to their political and economic implications. A statement by the African Network and Forum on Debt and Development pointed to the importance of a fair and transparent international debt workout mechanism. The case of Argentina showed that debt default was followed by quick economic recovery and strong GDP growth. However, poverty analysis has been largely neglected during the process of debt restructuring. In Paraguay, the repudiation of parts of the country’s debt was followed by a GDP growth of 14% in 2010.

The session Experiences of debt audits from around the globe provided insights into the impacts of different kinds of debt audits and their benefits and limitations, and discussed lessons learned relevant to a European context. Panellists Maria Lucia Fattorelli from Brazil, Eric Toussaint from Belgium, and Lidy Nacpil from the Philippines presented their hands-on experiences from working with debt audits. Speakers stressed the importance of political pressure, saying it is crucial to politicise the issue of debt which is often presented in purely technical terms.

The session Implications of different euro-zone debt outcomes drew on lessons and discussions from earlier sessions. Panellists Andy Storey from Ireland, Costas Lapavitsas of the University of London, and Euclid Tsakalotos of Greece analysed and debated the implications of different alternatives for euro-zone countries. While politically the European Union was seen as a chance to get away from nationalism, the project today seems to institutionalise neoliberailsm. This manifests in the Stability and Growth Pact, the mandate of the ECB, the Lisbon Treaty which makes the opening of capital accounts mandatory not only between EU members, but also with third countries, and the Eurozone itself, because of countries’ inability to devalue their currency or adjust their interest rates. Opinions were divided about the option to leave the eurozone. While strongly favoured by some, others call for a transformation of the euro project. A civil society coalition in Ireland has set up terms of reference for a debt audit commission in Ireland.

To review the discussion of previous days, during the session Demands and actions for debt justice, representatives from various social movements and trade unions gave practical snap-shots of their ongoing work. The session also explored next steps for civic action in Greece and in Europe and strategies for linking Southern and Northern initiatives. Concrete actions include:

  • Setting up a list serve to stay in touch on progress regarding debt audits
  • Creating a central portal to share information and bring together economic analysis on debt and austerity. Representatives from different countries will regularly feed information into this blog
  • An activists meeting in Brussels on 31 May at the EU parliament. CADTM can be contacted for further information
  • An activists meeting in the autumn and action around the G20 and G8 meetings
  • An agreement to put pressure on creditor governments to audit loans that are due to them (Norwegian government is an example in that regard)
  • UK Red Pepper magazine will publish an article in the autumn edition

The Athens debt declaration was one of the outcomes of the conference, presented during the concluding session.

Organisers: Greek Initiative for a Debt Audit, European Network on Debt and Development (Eurodad), Committee for the Abolition of Third World Debt (CADTM), Bretton Woods Project UK, Research on Money and Finance (RMF), Debt and Development Coalition Ireland, Action from Ireland (Afri), Jubilee Debt Campaign UK, World Economy Environment Development (WEED), and Observatorio de la Deuda en la Globalzacion Spain