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Parliamentary Committee: Preliminary Findings on Greece’s Public Debt

In April 2015 the Greek Parliament established the Truth Committee on Public Debt  mandating the investigation into the creation and growth of public debt, the way and reasons for which debt was contracted, and the impact that the conditionalities attached to the loans have had on the economy and the population.The Committee  has a mandate to raise awareness of issues pertaining to the Greek debt, both domestically and internationally, and to formulate arguments and options concerning the cancellation of the debt.

On Wednesday, June 17th 2015, the Truth Committee presented to the public its preliminary findings.

EXECUTIVE SUMMARY

The research of the Committee presented in this preliminary report sheds light on the fact that the entire adjustment programme, to which Greece has been subjugated, was and remains a politically orientated programme. The technical exercise surrounding macroeconomic variables and debt projections, figures directly relating to people’s lives and livelihoods, has enabled discussions around the debt to remain at a technical level mainly revolving around the argument that the policies imposed on Greece will improve its capacity to pay the debt back. The facts presented in this report challenge this argument.

All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.

It has also come to the understanding of the Committee that the unsustainability of the Greek public debt was evident from the outset to the international creditors, the Greek authorities, and the corporate media. Yet, the Greek authorities, together with some other governments in the EU, conspired against the restructuring of public debt in 2010 in order to protect financial institutions. The corporate media hid the truth from the public by depicting a situation in which the bailout was argued to benefit Greece, whilst spinning a narrative intended to portray the population as deservers of their own wrongdoings.

Bailout funds provided in both programmes of 2010 and 2012 have been externally managed through complicated schemes, preventing any fiscal autonomy. The use of the bailout money is strictly dictated by the creditors, and so, it is revealing that less than 10% of these funds have been destined to the government’s current expenditure.

This preliminary report presents a primary mapping out of the key problems and issues associated with the public debt, and notes key legal violations associated with the contracting of the debt; it also traces out the legal foundations, on which unilateral suspension of the debt payments can be based.

The findings are presented in nine chapters structured as follows:

Chapter 1, Debt before the Troika, analyses the growth of the Greek public debt since the 1980s. It concludes that the increase in debt was not due to excessive public spending, which in fact remained lower than the public spending of other Eurozone countries, but rather due to the payment of extremely high rates of interest to creditors, excessive and unjustified military spending, loss of tax revenues due to illicit capital outflows, state recapitalization of private banks, and the international imbalances created via the flaws in the design of the Monetary Union itself.

Adopting the euro led to a drastic increase of private debt in Greece to which major European private banks as well as the Greek banks were exposed. A growing banking crisis contributed to the Greek sovereign debt crisis. George Papandreou’s government helped to present the elements of a banking crisis as a sovereign debt crisis in 2009 by emphasizing and boosting the public deficit and debt.


Chapter 2, Evolution of Greek public debt during 2010-2015
, concludes that the first loan agreement of 2010, aimed primarily to rescue the Greek and other European private banks, and to allow the banks to reduce their exposure to Greek government bonds.


Chapter 3, Greek public debt by creditor in 2015
, presents the contentious nature of Greece’s current debt, delineating the loans’ key characteristics, which are further analysed in Chapter 8.


Chapter 4, Debt System Mechanism in Greece
reveals the mechanisms devised by the agreements that were implemented since May 2010. They created a substantial amount of new debt to bilateral creditors and the European Financial Stability Fund (EFSF), whilst generating abusive costs thus deepening the crisis further. The mechanisms disclose how the majority of borrowed funds were transferred directly to financial institutions. Rather than benefitting Greece, they have accelerated the privatization process, through the use of financial instruments.


Chapter 5, Conditionalities against sustainability
, presents how the creditors imposed intrusive conditionalities attached to the loan agreements, which led directly to the economic unviability and unsustainability of debt. These conditionalities, on which the creditors still insist, have not only contributed to lower GDP as well as higher public borrowing, hence a higher public debt/GDP making Greece’s debt more unsustainable, but also engineered dramatic changes in the society, and caused a humanitarian crisis. The Greek public debt can be considered as totally unsustainable at present.


Chapter 6, Impact of the “bailout programmes” on human rights
, concludes that the measures implemented under the “bailout programmes” have directly affected living conditions of the people and violated human rights, which Greece and its partners are obliged to respect, protect and promote under domestic, regional and international law. The drastic adjustments, imposed on the Greek economy and society as a whole, have brought about a rapid deterioration of living standards, and remain incompatible with social justice, social cohesion, democracy and human rights.


Chapter 7, Legal issues surrounding the MOU and Loan Agreements
, argues there has been a breach of human rights obligations on the part of Greece itself and the lenders, that is the Euro Area (Lender) Member States, the European Commission, the European Central Bank, and the International Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human rights violations as an outcome of the policies they obliged Greece to pursue, and also directly violated the Greek constitution by effectively stripping Greece of most of its sovereign rights. The agreements contain abusive clauses, effectively coercing Greece to surrender significant aspects of its sovereignty. This is imprinted in the choice of the English law as governing law for those agreements, which facilitated the circumvention of the Greek Constitution and international human rights obligations. Conflicts with human rights and customary obligations, several indications of contracting parties acting in bad faith, which together with the unconscionable character of the agreements, render these agreements invalid.


Chapter 8, Assessment of the Debts as regards illegtimacy, odiousness, illegality, and unsustainability
, provides an assessment of the Greek public debt according to the definitions regarding illegitimate, odious, illegal, and unsustainable debt adopted by the Committee.

Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is currently unable to service its debt without seriously impairing its capacity to fulfill its basic human rights obligations. Furthermore, for each creditor, the report provides evidence of indicative cases of illegal, illegitimate and odious debts.


Debt to the IMF
should be considered illegal since its concession breached the IMF’s own statutes, and its conditions breached the Greek Constitution, international customary law, and treaties to which Greece is a party. It is also illegitimate, since conditions included policy prescriptions that infringed human rights obligations. Finally, it is odious since the IMF knew that the imposed measures were undemocratic, ineffective, and would lead to serious violations of socio-economic rights.


Debts to the ECB
should be considered illegal since the ECB over-stepped its mandate by imposing the application of macroeconomic adjustment programs (e.g. labour market deregulation) via its participation in the Troïka. Debts to the ECB are also illegitimate and odious, since the principal raison d’etre of the Securities Market Programme (SMP) was to serve the interests of the financial institutions, allowing the major European and Greek private banks to dispose of their Greek bonds.


The EFSF engages in cash-less loans which should be considered illegal
because Article 122(2) of the Treaty on the Functioning of the European Union (TFEU) was violated, and further they breach several socio-economic rights and civil liberties. Moreover, the EFSF Framework Agreement 2010 and the Master Financial Assistance Agreement of 2012 contain several abusive clauses revealing clear misconduct on the part of the lender. The EFSF also acts against democratic principles, rendering these particular debts illegitimate and odious.


The bilateral loans
should be considered illegal since they violate the procedure provided by the Greek constitution. The loans involved clear misconduct by the lenders, and had conditions that contravened law or public policy. Both EU law and international law were breached in order to sideline human rights in the design of the macroeconomic programmes. The bilateral loans are furthermore illegitimate, since they were not used for the benefit of the population, but merely enabled the private creditors of Greece to be bailed out. Finally, the bilateral loans are odious since the lender states and the European Commission knew of potential violations, but in 2010 and 2012 avoided to assess the human rights impacts of the macroeconomic adjustment and fiscal consolidation that were the conditions for the loans.


The debt to private creditors
should be considered illegal because private banks conducted themselves irresponsibly before the Troika came into being, failing to observe due diligence, while some private creditors such as hedge funds also acted in bad faith. Parts of the debts to private banks and hedge funds are illegitimate for the same reasons that they are illegal; furthermore, Greek banks were illegitimately recapitalized by tax-payers. Debts to private banks and hedge funds are odious, since major private creditors were aware that these debts were not incurred in the best interests of the population but rather for their own benefit.

The report comes to a close with some practical considerations.

Chapter 9, Legal foundations for repudiation and suspension of the Greek sovereign debt, presents the options concerning the cancellation of debt, and especially the conditions under which a sovereign state can exercise the right to unilateral act of repudiation or suspension of the payment of debt under international law.

Several legal arguments permit a State to unilaterally repudiate its illegal, odious, and illegitimate debt. In the Greek case, such a unilateral act may be based on the following arguments: the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights; preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika; coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution; and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors , which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights. As far as unsustainable debt is concerned, every state is legally entitled to invoke necessity in exceptional situations in order to safeguard those essential interests threatened by a grave and imminent peril. In such a situation, the State may be dispensed from the fulfilment of those international obligations that augment the peril, as is the case with outstanding loan contracts. Finally, states have the right to declare themselves unilaterally insolvent where the servicing of their debt is unsustainable, in which case they commit no wrongful act and hence bear no liability.

People’s dignity is worth more than illegal, illegitimate, odious and unsustainable debt

Having concluded a preliminary investigation, the Committee considers that Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.

Making this preliminary report available to the Greek authorities and the Greek people, the Committee considers to have fulfilled the first part of its mission as defined in the decision of the President of Parliament of 4 April 2015. The Committee hopes that the report will be a useful tool for those who want to exit the destructive logic of austerity and stand up for what is endangered today: human rights, democracy, peoples’ dignity, and the future of generations to come.

source: CADTM.org

The Preliminary Findings were presented by Parliament Speaker Zoi Konstantopoulou, SYRIZA MEP Sofia Sakorafa, and Debt Truth Committee Scientific Coordinator Dr. Eric Toussaint.

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18 comments

  1. Thank you so much for putting this document in english! This is a corner stone document on the long Euro-Greek Odyssey. Its a land mark document!

    • Giaourti Giaourtaki

      Yeah, that’s cool and also is cool that time works fine and how fast this goes. You know, if it’s getting notice abroad the same folks that are loud about “the new government isn’t doing nothing against” will be again loud but this time one more time “reforms not investigations”, haha.
      One can expect some heavy research here too, this time about the tell-tale of the uncompetitive Greece:

      this hammer will be translated the next days at “Social Europe”

      • keeptalkinggreece

        excuse mewhat’ the point of adding links in German when most people here do not speak German

  2. Now the ECB should stop immediately all ELA credit if there is one member who has some brains left and the ECB should declare itself as bankrupt.
    This is the outcome of the incredible crime bailing out USA credit insurance companies in order to save Goldman Sachs (and the US) by use of the european taxpayer by installing former members of Goldman Sachs like Draghi into powerful positions.

  3. At last, a glimpse into the seedy and dark world of EU/IMF/USA ‘macroeconomics’. That said, this whole exercise was all about how to externally control sovereign EU nations under the guise of ‘economic re-structuring’. It is so clear to see that the EU via its eurozone connection has attempted to hijack the lifeblood of all EU member states via so-called austerity and IMF loans. All the politicians involved are both duplicitious and treasonable by their actions. They sold out their countries to the gangsters of the Rothschild bankers and their allies.

    Some politicians were probably bribed or blackmailed to allow all these things to happen yet most politicians will do anything for status, power and money – all these things are illusionary. When the jail door has closed behind politicians like Papandreou, Venizelos, Samaras and all the other EU/IMF/USA gofers, the people behind the banks should follow swiftly behind.
    The next six weeks should be interesting because Greece is the first country to stand up to these gangsters and mobsters – for Greece not to comply to its own servitude is above all, good sense and common sense.

  4. So, New Greek parliament and Tsipras are trying to cover the mistakes of previous Greek governments (who borrowed the money) by stating that the creditors are “criminals” because they want money back. I may get some inspiration from this document and try to get rid of my mortgage and my car load. Nice work! 🙂

    • As I am sure you know nothing about anything, let me inform you of the idea of bankruptcy. This declares all your debts void, as a matter of law. So yes, you can get rid of your mortgage and car loan: businesses do this all the time. Nice try at anti-Greek propaganda, but you need to be a bit smarter.

    • Giaourti Giaourtaki

      Wow, Scandal: Tsipras is member of a parliamentary inquiry committee

  5. Just keep putting nails in that coffin.
    Why doesn’t Tsipras man up, default on loans and leave euro zone?
    Best solution for all and no need for overstretched justifications.
    Or does Greece want to suck on German teat forever?

    • Excuse me? Do you think that Germany is the owner of the eurozone? The eurozone is established by Treaty as the property of the EU. Do you somehow think that Germany won world war 2? Because that is how it seems to most of Europe.

      • Giaourti Giaourtaki

        In some way it really won as afterwards all their in Europe pillaged infrastructure got legalized, profits of Aryanisation and never paid war reparations plus Marshall plan that brought the industry back that wasn’t destroyed made their economic miracle.
        Also the Nazis had something like a pre-EU with a single currency of 21 states with a very similar to Euro contract.
        Most of the countries their hordes raised hell in had much more problems to recover.

      • Let me rephrase: Or does Greece want to suck on EMU’s teat forever?
        Do recognize that Germany paid more than any other country for Greek bailouts, and will continue paying more than anyone else for further bailouts. That’s why Tsipras talks to Merkel so often, no?

  6. Lets just pretend a German board would have examined the legitimacy of Greek debt or German debt, would anyone in their right mind expected that either case would not have been in favor of Germany?

    Why is then that nobody here approaches the Greek findings on the Greek debt with the same level of mistrust?

    I mean personally I regard any findings on either side with suspicion, regardless of my nationality.

  7. I’m surprised how little the international media has picked up on this.

  8. Putting the word “Truth” in the name of a committee reminds me of the use of the word “Democratic” in the name of a state.

    • Giaourti Giaourtaki

      You are right as there can no democracy exists without abolishing power, state and money-system, this democratic nations bullshit is a perfect crime only invented to suppress and exploit the world proletariat, the huge majority of this undemocratic planet.