First Outcomes of an International Debt Conference in Brussels

EL Advocates for Remodelling of European Financial Institutions

2 May 2014

Haris Golemis, Alexis Tsipras, Maite Mola, and Pierre Laurent during the Press Conference in Brussels on 10 April.

On 10 April the Party of the European Left (EL) and transform! europe jointly organized an International Conference in Brussels. The aim of the meeting was to explore the alternatives to solve the problem of the debt and stop the austerity policies.

Economists, sociologists, politicians of the European Left, trade unionists and members of the social movements of more than 20 countries joined forces in theConference entitled “Together we can put an end to debt and austerity problems in Europe”. During a 10 hour debate day, they analysed the causes, targets, experiences and proposals in order to jointly prepare a social solidarity and united alternative economic policy for the Left.

During the day, the contributors spoke against neoliberal thinking that underpins austerity as the only possible alternative, and exposed a wide set of proposals showing the rationality and feasibility of a social economic alternative of the Left.

In the analysis of the causes and consequences of the generation and increase of the sovereign debt Sovereign debt Government debts or debts guaranteed by the government. as well as the politics of austerity the manner of how the debt is used to dominate other peoples, to blackmail them and to provoke external and internal imbalances, was denounced. Also the target which is behind that policy was pointed out: to transform the South of Europe into an area of cheap and deregulated labour without rights.

Proposals for a left economic model

The set of proposals that have been discussed throughout the day are based on four main pillars: ending the policy of austerity; the cancellation of a big part of the public debt; the creation of a new financial institution which funds public services by mobilizing the financial resources of the European Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

; and the restoration of democracy in Europe with changes in the financial and business systems.

From this basis, other measures were developed such as the change of the missions and role of the ECB ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.
, which has been offering loans to the private banks without any change in the financial system, while the private banks lend money to States at 5% of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. . One of the proposals is precisely that the ECB buys a part of the States debt and could lend directly to States in order to fund the development of public services “without imposing anti-social conditions” as they are doing with the states that have received financial aid. The European Left asked that only the ECB refinance banks at a low cost when they give credit to companies with “social and environmental” criteria.

European Fund for Social and Ecological Development

The alternatives of the EL are backed by a solid financing Project called European Fund for Social and Ecological Development that would be used to finance public services and the creation of employment at interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
to almost zero. The Fund may also finance projects of local authorities and social actors.

Other measures that have been presented from more than 50 speakers from Europe and Latin America, were the fair taxation, taxes on financial transactions, wage increase, the democratization of financial institutions, sustainable re-industrialization, put an end to tax havens and the audit of the “illegitimate” debt.

EL’s president Pierre Laurent stated that “it is necessary to restructure the debt to lighten it”. He announced that the party will work with these proposals in the electoral campaign for the elections on 25 May and requested the organization of a European Convention on debt and public investment in order to solve the problem of the debts of countries in difficulty, so that some part of that debt will be exonerated, and the review of the conditions for the payment of interest.




For the conference programme click here.

Source: Transform!



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