Who is Greek debt ΄sustainability΄ for?

20 February 2014 by Christina Laskaridis , George Papalexiou

Announcement by the Greek Debt Audit campaign

International lenders and their domestic Greek collaborators (the coalition government) are imposing widespread impoverishment and austerity in order to serve their interests. Meanwhile, the debt mechanism continues to chip away at the last remnants of rights that have remained.

Despite this, there is a lot of talk these days about the “sustainability” of Greek public debt, a measure that emerges from the rather arbitrary ratio of debt to 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.
. The trajectory of sustainability is estimated via various fanciful and imaginative economic baselines and other scenarios which try to locate the precise ratio at which Greek debt would be sustainable.

Prior to the 2009 deficit revaluations, the debt was 110% of GDP, a ratio that was used to terrorise citizens with the danger of default by suddenly awakening them to its ΄obvious΄ non-sustainability. It was on the ΄necessity΄ of lowering this ratio that the memoranda (the austerity packages) were based on. The packages try to convince that after the Greek state has forcefully indebted itself at least an extra 247 billion euros for its ΄salvation΄, and after it reaches the projected peak of 175% in 2016, a scenario of debt to GDP in ten years time (in 2020) at 124% will in fact be sustainable.

As the Greek Debt Audit Campaign, we stand against the debt dictatorship and its supposed sustainability for the following reasons:

1- The august institutions of 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.

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.

and EC have proved they are totally incapable of predicting the direction of the Greek economy and its related debt sustainability. Compare 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.

IMF : https://www.ecb.europa.eu/home/html/index.en.html
΄s projections with the ruthless reality and it is clear they cannot forecast even three months ahead with any precision, let alone assess debt sustainability in two, three or ten years. However, it was on the basis of their estimations, that the governments of the memoranda and the international lenders have shut schools, hospitals, and thousands of businesses – all in the name of a debt sustainability (which they simply hadn΄t calculated correctly).

2- After the hasty bundling of public utilities΄ debt (18 billion) and the Golman Sachs-soured swap (5.4 billion), public debt came to 329 billion euros in 2010. After three and a half years of fiscal adjustment and social disaster, the debt for 2013 has reached 322 billion (or 175% of GDP). And they still talk about debt sustainability, even though 563 billion euros were already paid in public debt servicing between 1992 and 2013.

3- If we were to use a different concept to sustainability, such as illegitimacy or odiousness, then we would reach very different conclusions about the acceptable levels of debt. The concept of debt illegitimacy raises concerns about the degree to which a state΄s resources should or should not be tied for debt repayments when simultaneously butchering social and labour interests and rights. This was, by the way, the position of the independent expert of the UN who visited Greece to assess the consequences of foreign debt repayments and the austerity it entails.

4- Using other ratios to assess the levels of debt, such as the amount the state spends on health or on education, we would forthrightly say that the debt has long been unsustainable. For example, by looking at the draft budget of 2012, we see that 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. payments on public debt absorbed 2.5 times as much money than pensions did, and 3.5 times more than education.

5- When a state is unable to fulfil its obligations to its lenders and simultaneously manage the needs of the populace, it can call on the ΄state of necessity΄ to defend itself from the haemorrhage of debt repayments. So, rather than figuratively hiding behind a ΄state of emergency΄ to repress and prohibit protests and to justify the increasing use of Legislative Acts, the state could draw upon legal practise and precedent to stop debt repayments.

6- The Memoranda and Loan Agreements were signed and imposed in a manner with no legitimacy or credibility for the populace. They did not even meet formal requirements of the constitution or parliament.


a. it is necessary to remind ourselves of the reasons why Greece entered the memoranda and bailouts. The Memoranda and continuous austerity was imposed to ensure the sustainability – not of Greek debt – but of major multinational banks, rather than high wages or an uncompetitive economy jeopardising the entire euro zone.

b. We do not question the debt from primarily a legal perspective but a political and social one. From the instant the accumulation of debt works against the interests of people within Greece we would say it is illegitimate. We do not forget the magnitude of the debts foreign banks gave to local authorities which were later offloaded to the government budget, nor the over-costing of public works, or the exorbitant cost of the Athens Olympic games. The list is endless.

c. After the PSI and the extensive imposition of bilateral and multilateral loans, the Greek debt profile is completely altered. The greatest amount of Greek debt is held by the EU member states, the IMF and the European bailout fund EFSF. Only 23.7% remains as bondholder debt, in the hands of various hedge funds Hedge funds Unlisted investment funds that exist for purposes of speculation and that seek high returns, make liberal use of derivatives, especially options, and frequently make use of leverage. The main hedge funds are independent of banks, although banks frequently have their own hedge funds. Hedge funds come under the category of shadow banking. who have made millions from it. The Troika is not only lending us the money and imposing strict disciplinary austerity to make sure the banks wont collapse, but now, to make sure the Troika΄s own loans will be repaid.

d. The first bailout calibrated the loans on the basis of the amount each country contributes to the ECB΄s capital, meaning Germany would give 22.3 billion, France, 16.7 billion etc. From the expected 80 billion, 73 billion was disbursed and Germany ended up lending 15.7 billion, with high and variable 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.
. The rates may have come down but the draconian surveillance remains, rendering these loans a good investment for the member states. It is from the sweat and blood of the people, i.e. the primary budget surplus that the government of Samaras-Venizelos has warmly welcomed, that their investments will come to fruition.

Any agreement that is defined by and for the creditors will simply reflect the continuation of these obviously failed debt management policies. We therefore propose to stop paying the debt, to engage in a debt audit and proceed to cancellation.

Chrisitna Laskaridis, George Papalexiou
Members of the Greek Debt Audit Campaign



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