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Thursday, 5 February 2015

Debt: which strategies should Europe adopt?

by CADTM Europe, 2/2/2015
The Bloco de Esquerda, the CADTM, Podemos and SYRIZA discussed strategies to deal with the European debt crisis at the European Parliament on January 20, 2015.
On Tuesday, January 20, 2015, SYRIZA and Podemos, in collaboration with the CADTM and the Bloco de Esquerda, organized a session of debates and confrontation of ideas at the European Parliament to discuss different strategies for countering Europe’s debt trap. Moderated by Teresa Rodríguez, this two and half hour session provided an opportunity for various political groups including the CADTM to examine both divergent and convergent aspects of the strategy to deal with creditors.

The experience of debt restructuring shows that unilateral acts are necessary

Éric Toussaint, spokesperson for the Committee for the Abolition of Third World Debt with a Ph.D. in Political Science, delivered an introductory note on restructuring, audit, suspension and cancellation of debt in recent decades.
Without going into the nitty-gritty of these measures (compilation available in an interview published on the CADTM’s website), the discussion revolved around the examples of (1) restructuring carried out in debtor countries under favorable conditions merely for geopolitical reasons (West Germany in 1957, Lech Walesa’s Poland in 1991, Mubarak’s Egypt in 1991 and Iraq under American control in 2004); (2) an exception where restructuring inadvertently facilitated an alternative government (Bolivia in 2005); (3) unilateral suspensions of debt payment either followed by negotiations (Argentina) or not followed by negotiations (Ecuador). Most of the restructurings (600 cases between 1950 and 2010) have adversely affected the economies and peoples of the concerned countries. Eric Toussaint showed that debt restructuring is a mechanism designed by creditors. The CADTM prefers not to consider restructuring as a demand and a solution as long as the creditors hold their ground. Éric Toussaint rounded up his historical analysis with the particularly interesting case of the Greek debt restructuring in 2012. Conducted only in the interest of creditors, it’s a sharp reminder of the restructurings that took place in the third world countries. The newly-formed Greek government led by SYRIZA must learn from this recent event.
Currently, the public creditors - who are at present the main creditors in Greece, Portugal and other countries subject to memoranda – do not wish to act in a way that would in any way recall the post-war approach of meting out favors to West Germany. "Several radical left parties (including Podemos, SYRIZA and the Bloco de Esquerda) are now offering restructuring and asserting their willingness to negotiate with the creditors. Whether such a negotiation could have a really positive outcome for the country and the people was the debate’s focal point, rather than the question of negotiation. Without suspension of payment, without audit, without other sovereign acts of debt resistance, it is very difficult to predict a substantial result from negotiations. In any case, we must be ready to take strong actions if negotiations do not materialize or have unfavorable results ".

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