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Posts Tagged ‘Nick Dearden

Dismantled and fed to profit-hungry corporations? Case of Greece

Greece is heading towards its third “bailout” (Fourth bailout after parliament voted for it).

This third bailout of €86 billion is on the table, which will be packaged up by international lenders with a bundle of austerity and sent off to Greece, only to return to those same lenders in the very near future.

We all know the spiralling debt cannot and will not be repaid.

We all know the austerity to which it is tied will make Greece’s depression worse. Yet it continues. (Nothing will do unless liquidity for internal Greek market is made available)

Nick Dearden, Wednesday 12 August 2015

If we look deeper, however, we find that Europe is not led by the terminally confused. By taking those leaders at their word, we’re missing what’s really going on in Europe.

In a nutshell, Greece is up for sale, and its workers, farmers and small businesses will have to be cleared out of the way.

Under the eye-watering privatisation programme, Greece is expected to hand over its €50 billion of its “valuable state assets” to an independent body under the control of the European institutions, who will proceed to sell them off.  (In order to ward off China from buying everything of value?)

Airports, seaports, energy systems, land and property – everything must go. Sell your assets, their contrived argument goes, and you’ll be able to repay your debt.

But even in the narrow terms of the debate, selling off profitable or potentially profitable assets leaves a country less able to repay its debts.

Unsurprisingly the most profitable assets are going under the hammer first. The country’s national lottery has already been bought up. Airports serving Greece’s holiday islands look likely to be sold on long-term lease to a German airport operator.

The port of Pireus looks likely to be sold to a Chinese shipping company. Meanwhile, 490,000 square meters of Corfu beachfront have been snapped up by a US private equity fund. It has a 99-year lease for the bargain price of €23million.

According to reporters, the privatisation fund is examining another 40 uninhabited islands as well as a massive project on Rhodes which includes an obligatory golf course.

Side-by-side with the privatisation is a very broad programme of deregulation which declares war on workers, farmers and small businesses.

Greece’s many laws that protect small business such as pharmacies, bakeries, and bookshops from competition with supermarkets and big businesses are to be swept away.

These reforms are so specific that the EU is writing laws on bread measurements and milk expiry dates.

Incredibly, Greece is even being told to make its Sunday opening laws more liberal than Germany’s. Truly a free market experiment is being put into place.

On labour, pensions are to suffer rapid cuts, minimum wages are to be reduced and collective bargaining is to be severely curtailed while it is to become easier to sack staff.

All of this is far more extreme that many of Greece’s “creditor” countries have implemented themselves. Changes to tax includes a massive hike to that most regressive of taxes VAT, on a wide range of products.

Of course, reforms in some areas of Greece’s economy might be a good idea, and indeed Syriza came to power promising to make serious reforms in, for instance, taxation and pensions. But what is being imposed by the lending institutions is not a series of sensible “reforms”, but the establishment and micromanagement of radical ‘free market’ economics.

The privatisation and deregulation bonanza opens vast new swathes of Greek society to areas where big business has never been able to set foot before.

The hope is that this will generate big profits to keep big business growing, as well as providing an extreme model of what might be possible throughout Europe.

Although what’s even more distasteful than the hypocrisy of European leaders forcing policies onto Greece that they themselves have not dared to argue for in their own countries, is the cynicism of those same leaders imposing policies that will benefit their own country’s corporations.

The intensity of the restructuring programme currently being agreed for Greece should dispel any lingering notion that this is a well intentioned but misguided attempt to deal with a debt crisis.

It is a cynical attempt to set up a corporate paradise in the Mediterranean, and must be resisted at all costs.

Andrew Bossone shared this link

“selling off profitable or potentially profitable assets leaves a country less able to repay its debts.”

Greece is heading towards its third “bailout”. This time €86 billion is on the table, which will be packaged up by international lenders with a bundle of austerity and…
independent.co.uk

Post-war Germany recovery? Any roles to Greece, Spain, and Turkey…?

Sixty years ago today, an agreement was reached in London to cancel half of postwar Germany’s debt.

That cancellation, and the way it was done, was vital to the reconstruction of Europe from war.

It stands in marked contrast to the suffering being inflicted on European people today in the name of debt.

Germany emerged from the WWII still owing debt that originated with the first world war: the reparations imposed on the country following the Versailles peace conference in 1919.

Many, including John Maynard Keynes, argued that these unpayable debts and the economic policies they entailed led to the rise of the Nazis and the second world war.

By 1953, Germany also had debts based on reconstruction loans made immediately after the end of the second world war. Germany’s creditors included Greece and Spain, Pakistan and Egypt, as well as the US, UK and France.

German debts were well below the levels seen in Greece, Ireland, Portugal and Spain today, making up around a quarter of national income.

But even at this level, there was serious concern that debt payments would use up precious foreign currency earnings and endanger reconstruction.

Needing a strong West Germany as a bulwark against communism, the country’s creditors came together in London and showed that they understood how you help a country that you want to recover from devastation.

It showed they also understood that debt can never be seen as the responsibility of the debtor alone. Countries such as Greece willingly took part in a deal to help create a stable and prosperous western Europe, despite the war crimes that German occupiers had inflicted just a few years before.

The debt cancellation for Germany was swift, taking place in advance of an actual crisis.

Germany was given large cancellation of 50% of its debt. The deal covered all debts, including those owed by the private sector and even individuals. It also covered all creditors.

No one was allowed to “hold out” and extract greater profits than anyone else. Any problems would be dealt with by negotiations between equals rather than through sanctions or the imposition of undemocratic policies.

Perhaps the most innovative feature of the London agreement was a clause that said West Germany should only pay for debts out of its trade surplus, and any repayments were limited to 3% of exports earnings every year.

This meant those countries that were owed debt had to buy West German exports in order to be paid.

It meant West Germany would only pay from genuine earnings, without recourse to new loans.

And it meant Germany’s creditors had an interest in the country growing and its economy thriving.

Following the London deal, West Germany experienced an “economic miracle”, with the debt problem resolved and years of economic growth.

The medicine doled out to heavily indebted countries over the last 30 years could not be more different.

Instead, the practice since the early 1980s has been to bail out reckless lenders through giving new loans, while forcing governments to implement austerity and free-market liberalisation to become “more competitive”.

As a result of this, from Latin America and Africa in the 80s and 90s to Greece, Ireland and Spain today, poverty has increased and inequality soared.

In Africa in the 80s and 90s, the number of people living in extreme poverty increased by 125 million, while economies shrank.

In Greece today, the economy has shrunk by more than 20%, while one in two young people are unemployed. In both cases, debt ballooned.

The priority of an indebted government today is to repay its debts, whatever the amount of the budget these repayments consume.

In contrast to the 3% limit on German debt payments, today the IMF and World Bank regard debt payments of up to 15-25% of export revenues as being “sustainable” for impoverished countries. The Greek government’s foreign debt payments are around 30% of exports.

When debts have been “restructured”, they are only a portion of the total debts owed, with only willing creditors participating.

In 2012, only Greece’s private creditors had debt reduced. Creditors that held British or Swiss law debt were also able to “hold out” against the restructuring, and will doubtless pursue Greece for many years to come.

The “strategy” in Greece, Ireland, Portugal and Spain today is to put the burden of adjustment solely on the debtor country to make its economy more competitive through mass unemployment and wage cuts.

But without creditors like Germany willing to buy more of their exports, this will not happen, bringing pain without end.

The German debt deal was a key element of recovering from the devastation of the second world war. In Europe today, debt is tearing up the social fabric.

Outside Europe, heavily indebted countries are still treated to a package of austerity and “restructuring” measures.

Pakistan, the Philippines, El Salvador and Jamaica are all spending between 10 and 20% of export revenues on government foreign debt payments, and this doesn’t include debt payments by the private sector.

If we had no evidence of how to solve a debt crisis equitably, we could perhaps regard the policies of Europe’s leaders as misguided.

But we have the positive example of Germany 60 years ago, and the devastating example of the Latin American debt crisis 30 years ago. The actions of Europe’s leaders are nothing short of criminal.

Note 1: While Greece, Spain and Turkey were bailing out Germany, their citizens were flocking to Germany to work under the recovery program.

Note 2: I guess the creditors were convinced that the hard working and law abiding Germans, under institutions still functioning, and an industrial know how… will generate the necessary profit to pay back the loans. I guess France and Germany do not believe that the other EU States, crumbling under their debts, are good enough people with sane institutions to generate any profit.

Najat Rizk shared a link.
Nick Dearden: Sixty years ago, half of German war debts were cancelled to build its economy. Yet today, debt is destroying those creditors

Odious Dept: IMF sustained by developing countries interests on loans

When presidents and the oligarchies in developing States are extended liquidity at high interest loans from international creditors and are used for their own benefit instead of investing the money in public infrastructure, whose debt is it? The president’s or the people’s?

This question has led to increasingly charged discussions between indebted countries and economists at institutions like the World Bank and the International Monetary Fund (IMF). Especially in post-revolutionary countries like Egypt and Tunisia, people are asking: Why should we pay a debt that went straight to the pockets of a dictator, or worse, financed a security apparatus that oppressed us?

Actually, these kinds of loans are categorized as Foreign Aid disbursed to governments, instead to particular communities or institutions.

Raphael Thelen posted on NOw this Feb. 8, 2013

Philip Rizk and other activists are leading the Drop Egypt’s Debt Campaign to make the issue public.

“We want to open the accounting books of the Mubarak regime. Many of those credits aren’t legitimate, because the IMF worked with the old regime, even though they knew that the money would not benefit the people.”

Several members of Mubarak’s regime were sentenced for corruption last year. The clique of young businessmen surrounding his son Gamal famously embezzled funds and oversaw opaque deals that involved the privatization of public companies and natural resources.

These “market-friendly reform programs”, dubbed neoliberal policies, were part of the prescribed structural adjustments that came as conditions for the IMF loan.

The Odious Debt concept was first tested in Ecuador in 2008.

After an audit by an international commission, the country’s democratically-elected President Rafael Correa declared that 30% of the debt had been contracted illegally by the previous administration. The findings led to a debt reduction of $3 billion. “As a president I couldn’t allow us to keep paying a debt that was obviously immoral and illegitimate,” Correa said.

The World Bank, IMF and Western analysts predicted that the Ecuadorian economy would take a hit, saying that foreign investors would refrain from making deals with the country. Instead, Correa used the money that would have gone into debt service and invested it in public infrastructure projects and education.

In 2010, two years after the debt audit, the economy had grown by 3.6 percent, and in 2011 by 6.5 percent. Poverty rates dropped from 36.7 percent in 2008 to 28.6 percent in 2011. Annual income per capita rose from $3,540 in 2008 to $4,200 in 2011.

Two years later international investors are investing in Ecuador again.

Nick Dearden from the human rights group Jubilee Campaign sees Ecuador as a role model for other countries. “If you look at the countries that defaulted on their debts, they are doing much better now. They have thrown Western institutions out and now are using their own resources,” he said.

Tunisia, where the Arab Spring originated, is pursuing a similar course.

A bill that is being prepared to be presented to the parliament asks for a debt audit and cancellation of debts that had been illegitimately contracted under ousted dictator Zine el-Abidine Ben Ali. The Tunisian government’s external debt is currently $14.6 billion, or 33 percent of the country’s GDP. Foreign debt payments are $1.9 billion a year, or 15 percent of government revenue. Though it is not clear how much, a part of the foreign debt was taken by Ben Ali’s regime, and debt audit activists say they might be odious.

As in Egypt, Ben Ali and his cronies were known for their corruption.

A letter signed by 100 members of the European Parliament is calling “for an immediate suspension of EU debt repayment by Tunisia (with frozen interests) and an auditing of the debt.” Belgium’s parliament as well has called for a similar suspension of all bilateral debts. Ecuador has offered the Tunisian government its experience in auditing its debt.

So far, Tunisia’s post-revolutionary government is cooperating with the IMF and the World Bank and has continued Ben Ali’s market-friendly economic policies of low taxes for corporations, the privatization of public firms and resources, as well as the flexibility of the labor law.  The resulting widening gap between rich and poor has sparked protests across the country.

In the difficult economic conditions of post-revolutionary countries like Tunisia, the easiest way to gain liquidity or repay existing debts is to take on new debts. But this only pushes the problems into the future, while the influence of institutions like the IMF grows along with indebtedness.

The IMF depends on the interest payment on debt of developing countries.

“This way the form of democracy might be preserved, but the people lose their decision-making power over their economy. They won’t be able to influence the country’s economic policies in a way that reduces poverty,” says Dearden. “The way out of this is a debt audit and a cancellation of its illegitimate

Note: On IMF failed mission https://adonis49.wordpress.com/2010/03/30/the-international-monetary-fund-imf-failed-in-its-mission-2/


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