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Abolish illegitimate and odious claims by European countries from third parties and give absolute priority to human rights
by ReCommons Europe
3 April 2020

Phase 2 of the ReCommonsEurope project: “The impact of European financial policies and development cooperation strategies on the South and possible alternatives”.

This document is the first of the five texts that form part of the publication entitled “The impact on the South of European financial policies and development cooperation strategies and possible alternatives”, elaborated in the framework of the ReCommonsEurope project. Since 2018, this project engages the CADTM, in collaboration with the association EReNSEP and the trade union ELA, in a work aiming to feed the debate on the measures that a peoples government in Europe should implement as a priority. This work of elaboration concerns all social movements, all people, all political movements that want a radical change in favour of the 99% .

Thus, a first phase of this project culminated in 2019 with the publication of a “Manifesto for a new internationalism of peoples in Europe”, which was signed by more than 160 activists, militant peoples and researchers from 21 European countries. This manifesto, published in 4 languages (French, Castilian, English and Serbo-Croatian), expose the most urgent measures on the following issues: currency, banking, debt, labor and social rights, energy transition in order to build an eco-socialism, women’s rights, health and education, as well as more broadly international policies and the need to promote constituent processes.

With this second phase, we seek to define a set of clear proposals that a peoples government should implement in order to bring about a real and profound change in the unjust relations between the European states and the peoples of the Global South. To this end, we are carrying out a process of drafting texts, based on joint work between activists, politicians and researchers from the countries of the South and the North. This work concerns the following areas: the indebtedness of the countries of the South vis-à-vis the countries of the North, free trade agreements, migration and border management policies, militarism, the arms trade and the wars, and reparation policies regarding the spoliation of cultural goods.

In addition to this first text, we invite you to read the other articles that are part of this project:

- Putting an end to the EU’s neo-colonial policies in the field of trade and investment

- End the inhumane migratory policies of Fortress Europe

The coronavirus pandemic is a serious public health problem and the human suffering caused by the spread of this virus will be enormous. If it massively affects countries of the Global South with very fragile public health systems that have been undermined by 40 years of neo-liberal policies, the death toll will be very high. We must not forget the critical situation of the Iranian population, victim of the blockade imposed by Washington, a blockade that includes medicines and medical equipment.

Under the pretext of necessary fiscal austerity to repay public debt, governments and major multilateral institutions such as the World Bank, the IMF and regional banks such as the African Development Bank have everywhere enforced policies that have deteriorated public health systems: job cuts in the health sector, precarious employment contracts, reduction of hospital beds, closure of local health centres, increase of health care costs and of prices of medicines, under-investment in infrastructure and equipment, privatization of various health sectors, under-investment by the public sector in research and development of treatments for the benefit of the interests of large private pharmaceutical groups...

This is true in Africa, Asia, Latin America and the Caribbean and in the countries of the former Eastern bloc (Russia and other former republics of the former USSR, Central and Eastern Europe). Nevertheless, this obviously also concerns developed economies.

It is very urgent to suspend the payment of the debt and to use the sums thus released to meet the needs of the populations and to protect them.

It must be stressed that the effects of the economic and health crisis will be particularly noticeable in the countries of the global South. Not only are these countries in a weakened position to cope with the epidemic and its economic consequences, but also the fall in the prices of raw materials will multiply the cost of borrowing for these countries. In addition, private financial companies in the North are withdrawing the purely financial investments they had made in the Global South (especially in the stock markets), thus causing a significant repatriation of capital to the North.

In the following document, we analyze the impact of European financial policies on the peoples of the South and make a series of proposals in this regard. 

Since 1980, the countries of the South [1] have repaid 18 times what they owed in 1980, but at the same time their debt level has increased more than 12-fold. Between 2000 and 2018, the public external debt of the countries of the South more than doubled from US$1,300 billion to nearly US$3 trillion [2]. A new debt crisis has already begun in about ten countries according to IMF data.

However, and contrary to the generally accepted idea that countries of the North aid countries of the South, an analysis of all North-South financial flows shows that for every 1 euro sent from countries of the North to countries of the South (via foreign direct investment - FDI, official development assistance - ODA, portfolio investment, private aid, other official flows), 3 euros go the other way (debt servicing, profits repatriated by investors, capital flight, ill-gotten assets, other illicit financial flows). This is a real “debt system”, which keeps the countries of the South dependent on the so-called developed countries.

The system begins with bilateral debts. Despite a strong lack of transparency in these accounts, as far as bilateral claims are concerned, according to World Bank data, the public external debt of the countries of the South amounts to nearly US$3 trillion. The bilateral share of this debt is estimated at US$437.9 billion, i.e. almost 15%.

Beyond bilateral debts, EU countries can also exert influence on countries of the South through the European Investment Bank. The credits granted by the EIB are marked by characteristics that are contrary to the interests of the people: lack of transparency leading to corruption, embezzlement and over-invoicing, aid tied to European companies in order to favour the profits of their major shareholders, failing environmental standards, promotion of economic spin-offs to the detriment of the fight against poverty.

At the European level, it should be stressed that monetary policy is not without consequences for the peoples of the South. In response to the outbreak of the 2007-2008 financial crisis, the European Central Bank (ECB) implemented a policy of quantitative easing (QE). Beyond the highly questionable effects of this policy in Europe, QE caused a massive influx of capital from EU countries to countries of the South. In search of profitable investments, large amounts of cash were poured into these countries. European investors rushed into bond issues from Southern countries because they were more remunerative than bonds issued by Northern governments. These bonds are obviously riskier. Moreover, large purchases of bonds from the South lead to a sharp increase in the debt of the countries that issue them, taking them to unsustainable levels. As a new debt crisis spreads, these highly speculative and volatile financial flows contribute more to destabilizing the economies of these countries than to strengthening them.

Neo-liberal policies (SAPs from the 1980s onwards) increased the number of poor people in countries of the South. The global financial institutions, led by the World Bank, are promoting “financial inclusion” to accelerate the integration of this population into the market economy.

For hundreds of millions of extremely poor people, “financial inclusion” actually means that they will become easy prey for lenders, whether through microcredit agencies or traditional loan sharks. Neo-liberal attacks on public services (schools, hospitals) and the precariousness of those in paid employment further accentuate monetary needs, especially for single-parent women. Capitalist microcredit institutions, sponsored by major international institutions such as the World Bank and the European Investment Bank (EIB), are multiplying, under the guise of fighting poverty, and are making large profits on the back of the poorest sectors of the population by imposing abusive conditions and usurious rates. Microcredit agencies, which include subsidiaries of large private banks such as BNP Paribas and Santander, claim to have almost 100 million clients worldwide, almost 80% of whom are women. Despite the media campaign in its favor, the record of microcredit over the last thirty years is clearly quite negative.

The solutions to be found in terms of the fight against poverty do not consist in indebting the poor via the market but in significantly increasing their income by guaranteeing them sufficiently high prices for their products (farming and fishing / agricultural and fisheries/ products in particular), decent wages, stable jobs, access to free public services in education and health, access to credit via public bodies or cooperatives lending at zero or very low rates.

The fight against abusive microcredit must be linked with the great battle against public debt.

On the other hand, we must not forget the so-called Official Development Assistance, which generally serves to maintain relations of domination between countries. Aid that is “conditioned” by the application of neo-liberal policies:- such as, to give but a few examples, cuts in public spending that degrade the quality of health and education services, falling employment in the civil service, reduced public aid to small local producers, making workers more precarious; privatization, controlling border and migration to strengthen Fortress Europe. All these conditions are defined by the major governments of the North and the World Bank/IMF couple. This aid is granted through three channels: multilateral aid, bilateral aid and NGOs . In addition, a number of expenditures counted as ODA are completely questionable or downright odious because they never reach the populations that are supposed to benefit from them: they are used, for example, for the detention of asylum seekers or other restrictive migration policies applied on the territory of EU countries. Some of the sums included in ODA are the result of a pure play on words. For example, bad debts are written off and accounted for as if they were a donation, while no funds are actually granted to the country concerned.

As in Northern countries, one of the preferred means of fostering private sector involvement is the promotion of public-private partnerships (PPPs). Formerly financed by governments, the financing and realization of infrastructure, goods and services are then entrusted to the private sector... Public authorities are becoming more and more indebted to the private sector. Large private public works companies become owners of new infrastructure and then lease it to the public authorities. These public-private partnerships (PPPs) are characterized by a lack of transparency in tendering and accounting, over-invoicing by private companies, non-compliance with the standards in force, lack of public consultation and benefits for the population, rental contracts lasting several decades at the expense of public authorities, and so on. PPPs must be rejected!

Finally, we must not forget that European States are part of international institutions that go beyond the European framework: the International Monetary Fund (IMF) and the World Bank (WB), and even the African Development Bank for some European States, especially former colonial metropolises. This is also the case for the Asian Development Bank, the Asian Investment Bank for Infrastructure (AIIB) and the Inter-American Development Bank (IDB). The European states bear a heavy responsibility for the harmful policies they pursue.

Considering 1. the anti-democratic character of these institutions, 2. the flagrant contradictions between the IMF’s structural adjustment plans and several international human rights treaties, 3. the responsibility of these institutions for the outbreak of the Third World debt crisis in 1980, 4. the past and present financing of despotic or dictatorial regimes by the IMF and World Bank,
the debts claimed by the World Bank and IMF from the countries of the South must be recognized as illegitimate and/or odious. Despite the hegemony of the United States in these two institutions since their creation, by virtue of the voting rights of EU countries (or groups of countries presided over by an EU country) [3], the latter also have a clear responsibility for the level of indebtedness of the countries of the South [4] and for the negative consequences of the policies pursued there.

In conclusion, European governments (accomplices of large European private companies), both historically and because of their political, economic, military or financial weight on the world stage, have a huge responsibility for the injustices suffered by the peoples of the South both bilaterally (“old” empires, the transition from colonialism to neo-colonialism, specific free trade agreements, interloping networks - Françafrique -, etc.) and through their own actions.), as well as multilaterally (continental free trade agreements - Eurafrique -, regulations on fiscal issues, EU countries’ membership and voting rights in international financial institutions - World Bank - WB, International Monetary Fund - IMF, European Investment Bank - EIB, World Trade Organisation - WTO, Group of 7/20 (G7/20), Paris Club, OECD, etc.). -, representations to the UN Security Council, etc.).

Recommendations

In order to cancel the illegitimate and odious debts claimed from third countries and thus promote sovereign, solidarity-based and self-centred forms of development of the countries of the South, the governments of European countries should, without any form of interference, undertake to :

  • Strictly respect the primacy of human rights over all other rights.
  • Oppose the systematic promotion of the private sector to finance the development of countries of the South, and in particular oppose the promotion of Public/Private Partnerships (PPPs).
  • Cancel their support for the abusive microcredit system and its institutions, favouring their replacement by genuine cooperatives managed by local populations and by a public credit service granting loans at zero or very low interest rates.
  • Put an end to neo-liberal policies and the privatization of public services.
  • Repeal a series of international, multilateral and/or bilateral treaties (economic, commercial, political, military, etc.) that are contrary to the exercise of the full sovereignty of the States of the South and to the interests of the peoples of the South and, more broadly, to the general interest of humanity.
  • Leave the international institutions and other informal groups that in essence feed North/South asymmetries, including the IMF, the World Bank, the WTO, the Paris Club, the G7 and the G20.
  • Leave regional development banks outside their borders, including the African Development Bank, the Asian Development Bank, the Inter-American Development Bank.
  • Join other countries of the South to create alternative multilateral international institutions that are democratic (on the principle of one country = one vote), equitable and under popular control. This means contributing to the creation of new international institutions that respect human rights and nature and to the in-depth reform of the United Nations Organization, in particular by putting an end to the right of veto in the Security Council. The in-depth reform must also concern certain specialized UN agencies that have become captive to the “partnership” with private foundations that promote PPPs, microcredit, the market at large, free trade,...
  • Support the implementation of citizen audits on their territory in order to cancel debts claimed from third countries that have been identified as illegal, unsustainable, illegitimate and/or odious.
  • Launch a vast audit program with citizen participation to highlight all forms of spoliation and exploitation of the peoples of the South.
  • Impose heavy fines on companies that have plundered the peoples of the South in various forms in order to contribute financially to a special aid and compensation fund;
  • Finance the countries of the South, excluding official development assistance, by means of zero-interest loans, repayable in whole or in part in the currency desired by the debtor.
  • Make available to the populations of the countries of the South through their associations/autonomous organizations, all documents, including those classified as “defence secret”, that can shed light on the origin of the debts claimed by various creditors.
  • Regularly make public all claims against third parties in an easily accessible and comprehensible form.
  • Expropriate “ill-gotten goods” by the rulers and ruling classes of the South and return them to the populations concerned and under their control.
  • Put an end to official development assistance in its current form as it is essentially an instrument of domination for the almost exclusive benefit of the countries of the North and to replace it with an unconditional “Contribution of reparation and solidarity” in the form of grants, excluding in its calculation debt cancellations and amounts that do not serve the interests of the populations of the South. This contribution must correspond to at least 1% of the gross national income of the most industrialized countries.
  • Issue an official public apology for all the wrongdoings committed by European powers towards the populations of the South, entitling them to reparations.
  • Affirm the right to reparations and/or compensation to peoples who were victims of colonial plunder and spoliation through the debt mechanism.
  • Acknowledge the ecological debt of industrialized countries to the countries of the South and make reparations and/or compensation by recovering the cost of these expenses through a tax or fines levied on the large companies responsible for pollution.
  • Prohibit companies from speculating on the resources and production of the countries of the South.
  • Heavily punish companies guilty of any form of corruption by public officials of the countries of the South.
  • Sanction senior officials and political personnel who in European countries have favored or are favoring the spoliation in various forms of the peoples of the South.
  • Heavily sanction banks (including withdrawal of banking licences) that launder dirty money and are complicit in tax evasion, capital flight, and spoliation of the populations of the South.

Translated by Pierre-François Grenson and Christine Pagnoulle.


Footnotes :

[1By countries of the South, we mean all low- and middle-income countries as defined by the World Bank. Available at: https://data.worldbank.org/income-level/low-and-middle-income?view=chart

[2Based on data available on the World Bank website as of 8 September 2019

[3For the World Bank, Germany (3.93%), France and the United Kingdom (3.68% each) hold 11.29% of the voting rights. If the groups of countries chaired by Austria (4.75 per cent), the Netherlands (4.11 per cent), Italy (3.37 per cent) and Iceland (3.03 per cent) are added, their voting rights reach 26.55 per cent. See: http://pubdocs.worldbank.org/en/329671541106474760/IBRDEDsVotingTable.pdf For the IMF, Germany (5.32 per cent), France and the United Kingdom (4.03 per cent each) account for 13.38 per cent of the voting rights. If the groups of countries chaired by Austria (3.23 per cent), the Netherlands (5.43 per cent), Italy (4.13 per cent) and Iceland (3.29 per cent) are added, their voting power reaches 29.46 per cent. See: https://www.imf.org/external/np/sec/memdir/eds.aspx

[4One example is the MENA region’s debts recognized as odious by the European Parliament: On the odious debts of the MENA region: Resolution of 10 May 2012, paragraph 6: "considers the external public debt of the countries of North Africa and the Middle East to be odious given that it has been accumulated by dictatorial regimes, mainly through the personal enrichment of the political and economic elites. See : www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2012-0201&language=FR&ring=A7-2012-0104

ReCommons Europe