Is Democracy compatible with the determination of EU institutions, whether in Greece or elsewhere?

3 June 2015 by Eric Toussaint , Thierry Brun

Interview of Eric Toussaint for the French weekly paper Politis 1st June 2015

I. Do you see the negotiations between Greece and its creditors as involving Europe’s economic and political future, and why?

The political dimension is essential. Is it possible or not for a people to vote in such a way that their determination to reject austerity can be heard? Is democracy compatible with the determination of EU institutions? The answer to such questions is of major import for all Europe.

II. Is not the decision of the EU creditors not to pay the €7.2bn of the so-called ‘bailout’ plan a kind of political blackmail?

Indeed. It is obvious that 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.
, the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, the European Commission and the governments of major Eurozone member states are working hard at pushing Tsipras and his government out of the electoral promises that got him elected on 25 January. Alexis Tsipras and Yannis Varoufakis have made major concessions, particularly with regard to further privatization and debt payment on the dot. However creditors are still not satisfied.

III. Are the conditions set by the EU group for transferring money a useful approach to solving the Greek economic crisis?

Quite the opposite. There are at least four stumbling blocks:
1. Creditors want all retirement pensions to be lowered by €130 a month within the next three years while they have already been cut by 40%, which means that 45% receive less than 660 € a month, and so are below the poverty line and the government had promised to give back something of what was withheld to pay the debt to pensioners with less than €700 (about 67%).
2. Creditors want the government to go even further than the previous one in terms of destabilization of the labour ‘market’, whereas it had in fact promised to cancel some of the anti-social measures taken previously.
3. While Tsipras has already agreed on the privatization of the Port of Piraeus, creditors want him to back down even further, against the advice of several ministers.
4. Creditors refuse to cancel a substantial part of the debt. At best, if the Tsipras government capitulated, they might grant a new restructuring of the debt that would only push deadlines further and would mean that the Greek government would have to comply with their demands on a permanent basis.

IV. Does not this conditional financial ‘help’ postpone the moment when economic problems have to be solved rather than providing a solution?

The aim of postponing the deadline (there is no help at all) is to stifle the Greek economy and financial system and thus bring down the government.

V. Next to negotiation with creditors, the Greek Parliament has set up a Committee for the Truth on the Greek Debt. How far have you got in your investigation?

The Committee for the Truth on the Greek Debt that I am coordinating is moving fast. Greek debts that were cumulated before 2010 were already to a large extent illegitimate and / or illegal (arms contracts involving fraud and corruption, large-scale construction-work related to the 2004 Olympics with overbilling and all sorts of embezzlement, tax giveaways to a privileged minority, bailing out of banks, excessive 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.
) but what is striking is the extent to which debts contracted since 2010 are flawed.
The memoranda imposed by the Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

from 2010 onward, the 2012 debt restructuring, and the accumulated Greek public debt are all characterized by irregular, illegitimate, illegal and in many cases odious features.

New creditors, with successive Greek governments aiding and abetting, have cornered Greece into a situation where repayment is unsustainable. The social and economic policies they have enforced have resulted in a 25% fall in the GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
while Greece had experienced sustained growth until 2008. In 2009, just before the crisis, growth had fallen to 0% but by then the GDP of other Eurozone countries had fallen by 4%. Creditors pushed unemployment to unprecedented heights and drastically reduced private and public demand. Public debt increased from 110% of the GDP in 2009 to 185% in 2014. These creditors (the Troika) imposed the notorious ‘conditionalities’ whose main aims were first, to bail out Greek and foreign private banks (mainly French and German banks) even though they were largely responsible for the crisis; and second, to enforce recessive and regressive neoliberal macroeconomic policies (privatisations, layoffs, drastic reduction of income, etc.) thus violating economic, social and cultural rights as well as civil and political rights. For 2015 alone, creditors have demanded €23bn. Several payments have already been made and since the February 2015 agreements were signed, Greece has steadily moved closer to a situation of financial unsustainability.

VI. Is cancelling part of the Greek debt an option to be considered, and could it be a solution for the more highly indebted European countries?

Cancelling or, in the absence of any agreement, unilaterally repudiating a large part of the debt is a necessary condition for Greece to recover. This also applies to other countries. However it is not enough. Other measures have to be taken, such as socializing the banking sector, imposing high taxes on the richest 1%, carrying out an in-depth tax reform and fighting tax evasion, controlling capital flow, deprivatizing, financing public services and creating decent and useful jobs.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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