Dear colleagues, 

Six years after economic crisis hit Greece, a new agreement between the government and its debtors offers a glimmer of hope for the country's ravaged health services.
 
Greece's initial bailout by the European Union, European Central Bank and International Monetary Fund stipulated extensive austerity measures and structural reforms for the health sector. Many people saw their health insurance entitlements reduced and health provision cut, at a time when it was most needed as unemployment soared and incomes dropped. Many struggled to afford adequate food or to properly heat their homes.
 
As a result there were large increases in unmet medical needs, a marked worsening of mental health, and a sharp deterioration in the health status of vulnerable groups, particularly drug users and migrants. As of now, nearly a quarter of the Greek population lacks health insurance.
 
Last month, a new coalition government formed under Alexis Tsipras, leader of left-wing party Syriza, promised to put an end to this situation and wage a war against what his party terms a "humanitarian crisis".
 
This week, after a round of intense negotiations with European institutions and the IMF, Tsipras's government was granted breathing space to put its programme into action. Pending the approval of parliaments in six EU member states, Greece's creditors agreed to extend financial assistance for a further four months.
 
So how might Tsipras ease the health crisis? In its interim promises to creditors, the government committed to "control health expenditure and improve the provision and quality of medical services, while granting universal access". It has rightly emphasised the importance of expanding access to healthcare as a means to end the health crisis. The details have yet to be spelled out, but one thing it can do is learn from the legacy of recent failed policies.
 
The previous government introduced two programmes to try to improve access to healthcare, but both fell short. First, a health voucher scheme was intended to provide access to a limited number of medical services for 230,000 uninsured citizens for two years beginning in 2013. Yet, by March 2014 a maximum of just 23,000 vouchers were issued. The reason? The scope of services covered was too limited and eligibility criteria overly strict.
 
A second – more promising – legislative reform began in the summer of 2014 to grant uninsured people access to primary, in-hospital and pharmaceutical care. However, the initial evidence suggests that this too failed to deliver, because of poor advertising, inadequate organisation, and stigmatising and bureaucratic means testing. And those intended to benefit were not exempt from high payments for any medicines they might need.
 
To tackle health inequities requires universal provision, as a recent major report for the World Health Organization made clear.
 
Aside from health system policies, the government has also pledged to invest in active labour market programmes and provide targeted assistance to those in absolute poverty – all without harming public finances. It hopes the funds will come from curbing tax evasion, fighting corruption, and improving fiscal management, all persistent weaknesses in the Greek economy.
 
Beyond Greece, the broader issues raised by Syriza's stand – defending the welfare state and putting an end to austerity – resonate elsewhere in Europe. Notably, Italian prime minister Matteo Renzi and the newly powerful Podemos party in Spain have challenged the EU policy of hardline austerity in response to the European crises and have called for growth-oriented policies in their countries that include public investment in health and social protection.
 
Yet, in the context of continuing economic difficulties in southern Europe and no apparent change of heart in Germany or other strong European economies on the mantra of imposed austerity, challenging the status quo will be difficult. The outcome of the Spanish elections, due before the end of the year, will set the stage for how the Eurozone moves ahead on such issues.
 
For now, the new Greek government has been given valuable policy space to implement its attempts to invigorate the economy and bolster social protection. Recent signs of a budding economic recovery and the government's pro-welfare state rhetoric suggest a possible end to Greece's health crisis is finally in sight.
 
After half a decade of declining health status and defunding the health system, overcoming the catastrophic legacy of austerity will require years of persistent and systematic effort. Ensuring universal access to health services would be a first step in the right direction.

This article was published today in the New Scientist. 

All the best,
Alex Kentikelenis

========
Alexander E. Kentikelenis
Research Associate in Sociology and Political Economy
Department of Sociology
University of Cambridge

King's College 562
Cambridge, CB2 1ST
+44 (0)759 3212319
www.kentikelenis.net

Dear Friends & Colleagues,

 

I have recently written an op-ed for The Globalist titled “The US Federal Reserve and Shared Prosperity” [HERE]. It is based on a longer article titled “The Federal Reserve and Shared Prosperity: A Guide to the Policy Issues and Institutional Challenges” [HERE].

 

In the wake of the Great recession, monetary policy focused on quantitative easing. Now, there is talk of normalizing monetary policy and interest rates. That conversation is important, but it is also too narrow and keeps policy locked into a failed status quo. There is need for a larger conversation regarding the entire framework for monetary policy and how central banks can contribute to shared prosperity.

 

I hope the paper can help promote that conversation. Please feel free to share it with others who may be interested in this subject.

 

Best,

 

Tom Palley

 

Thomas Palley

Tel: (202)-667-5518

e-mail: mail@thomaspalley.com

www.thomaspalley.com

Dear colleagues,

 

The need for and nature of a sovereign debt restructuring mechanism are being discussed at a committee of the UN General Assembly, in accordance with a resolution of the UNGA to set up such a mechanism which is intended to help countries experiencing an external debt crisis.

During the first meeting of the Committee on Sovereign Debt Restructuring Processes held at the UN in New York, I made a presentation on “Crisis Resolution and International Debt Workout Mechanisms” that may be of interest.

 

Yılmaz Akyüz

Chief Economist

The South Centre

 

International Debt Workout Mechanisms

 

Debt restructuring is a component of crisis management and resolution; it needs to be treated in the context of the current economic conjuncture and vulnerabilities.

 

International Debt Workout Mechanisms (IDWMs) are not just about debt reduction, but also include interim arrangements to provide relief to debtors including temporary hold on debt payments and financing.

 

IDWMs should address liquidity as well as solvency crises.  The difference is not always clear.  Most start as liquidity crises and can lead to insolvency if not resolved quickly. Liquidity crises also inflict serious social and economic damages as seen in the past two decades even when they do not entail sovereign defaults.

 

IDWMs should apply to crises caused by external private debt as well as sovereign debt.  Private external borrowing is often the reason for liquidity crises.  Governments end up socializing private debt.  They need mechanisms that facilitate resolution of crises caused by private borrowing.

 

IDWMs apply to a legal, not an economic concept, of external debt.  Legal concept: debt issued under foreign jurisdiction irrespective of its currency of denomination and holders.  Economic (Balance of Payments) concept: debt held by non-residents irrespective of the law it comes under and its currency denomination.

 

Local-law debt should not come under IDWMs even when held by non-residents.  This was agreed during the debate on the Sovereign Debt Restructuring Mechanism (SDRM) in the IMF in the early 2000s.  For such debt governments have the means to resolve collective action problems.

 

Recent Crises and Current Vulnerabilities

 

Only one of the last 8 major crises in emerging and developing economies (EDEs) was due to internationally-issued sovereign debt (Argentina).  Mexican and Russian crises were due to locally-issued public debt (tesobonos and GKOs); in Asia (Thailand, Korea, Indonesia) external debt was private; in Brazilian and Turkish crises too private (bank) debt played a key role alongside some problems in the domestic public debt market.

 

We have had no major new crisis in the South with systemic implications for over a decade thanks to highly favourable global liquidity conditions and risk appetite, both before and after the Lehman collapse, due to policies in major advanced economies, notably the US.  But this period, notably the past six years, have also seen considerable build-up of fragility and vulnerability to liquidity and solvency crises in many EDEs (see the South Centre’s Research Paper 60).  This is a matter of concern because favourable global financial conditions are unlikely to last over the coming years.

 

Sovereign international debt problems may emerge in the so-called frontier economies usually dependent on official lending.  Many of them have gone into bond markets in recent years, taking advantage of exceptional global liquidity conditions and risk assessments.  There are several first-time Eurobond issuers in Sub-Saharan Africa and elsewhere.

 

In emerging economies (EMEs) internationally-issued public debt as % of GDP has declined significantly since the early 2000s.  Much of external debt (in BOP terms) of these economies is now under local-law and in local currency.  However, there is a large build-up of private external debt in forex issued under foreign law since 2008. Many of them may face contingent liabilities and are vulnerable to liquidity crises.

 

Crisis Intervention

 

Interruption of access to international financial markets, stop in capital flows, foreign exit from local financial markets and capital flight by residents resulting in rapid depletion of reserves, currency collapse and interest rate hikes; governments are often too late to recognize the gravity of the situation.

 

IMF lending is typically designed to bail out creditors – to keep debtors current on their obligations to creditors – and to avoid exchange restrictions and maintain the capital account open.

 

The IMF imposes austerity on the debtor, expecting that it would make debt payable and sustainable and bring back private creditors.  It has little leverage on creditors.

 

The problems with standard crisis intervention are: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure; and creates risks for the financial integrity of the IMF.

   

Many of these problems were recognized after the Asian crisis, giving rise to the SDRM, originally designed very much along the lines advocated by UNCTAD throughout the 1980s and 1990s (though without due acknowledgement).  However, it was opposed by the US and international financial markets and could not elicit strong support from debtor EDEs, notably in Latin America.  It was first diluted and then abandoned.

 

The question of IDWMs was put on the back-burner after the early 2000s as strong global growth, unusually favourable conditions in international financial markets and rapid recovery of capital flows to EDEs led to complacency and served to obscure continued weaknesses and vulnerabilities in several EDEs.  The matter has come back to the attention of the international community with the Eurozone crisis and then with vulture-fund holdouts in Argentinian debt restructuring.

 

A New IMF Proposal

 

After pouring money into Argentina and Greece whose debt turned out to be unpayable, the IMF has proposed a new framework to “limit the risk that Fund resources will simply be used to bail out private creditors” and to involve private creditors in crisis resolution.

 

The proposed intervention and crisis resolution would be different according to how the problem facing the country requesting IMF assistance is perceived.

 

Where debt is deemed to have a high probability of sustainability, the IMF would lend as usual, under the exceptional lending framework of 2002, while the country would make policy adjustments.

 

If debt sustainability looks uncertain, the IMF would require reprofiling (rollovers and maturity extension) before lending.  If debt turns out to be unsustainable at the end of the IMF programme, then restructuring (debt relief) would be sought.

 

If debt is seen as unsustainable with a high probability, the IMF would require upfront debt reduction before lending.

 

Problems with the New Proposal

 

The proposed shift of the IMF away from creditor bailouts is welcome.  But for several reasons the proposal does not provide a viable and reliable IDWM.

 

The IMF does not have a good record in sustainability assessments but wants to pass judgement on whether or not a country approaching it for assistance is solvent and needs reprofiling and restructuring.  These decisions should mainly be left to the country concerned.

 

There is no legally binding framework for reprofiling and restructuring.  They are left to negotiations between the debtor and the creditors, to be facilitated by various contractual provisions.

 

Reprofiling needs to be done quickly to prevent meltdown.  This could be possible when debt is mainly in syndicated bank credits, but not when it is in widely dispersed bonds.  Even in what is widely considered as successful instances of negotiations, agreements with banks in Korea, Brazil and Turkey came only after the deepening of the crisis as banks were interested in exiting quickly rather than rolling over their claims.  Thus, in a statement at a G20 meeting, Korea hinted its agreement with many observers who “have found that Korea could have solved its liquidity problem sooner had a standstill programme been in place at the time Korea requested IMF assistance at the end of 1997".

 

If creditors fail to agree to reprofile and restructure and the IMF does not lend without these, then it would effectively be telling the debtor to default.

 

But it makes no proposal to protect the debtor against litigation and asset grab by creditors.

 

Reform and Limits of Contract-Based Resolutions

 

The IMF and others have been making proposals for improving debt contracts by inserting better-designed CACs, stronger pari passu clauses etc. in order to facilitate negotiated settlements. There is a growing consensus that this route needs to be explored further in resolving liquidity and solvency crises.

 

However, there are well recognized limits to what negotiations can achieve.

 

A viable solution could be to rely on a judicious combination of contractual and statutory arrangements in different stages of crisis resolution.

 

Elements of a Workable IDWM

 

•             Statutory reprofiling: Need for temporary debt standstills and exchange controls whether it is a liquidity or solvency crisis or is caused by public or private debt.  The decision would be taken by the country concerned and sanctioned by an internationally recognized independent body to impose stay on litigation.  

•             Lender-in-possession financing: sanctioning standstills automatically grants seniority to new loans, to be used for current account financing, not to pay creditors or finance capital outflows.  The IMF should be required to lend into arrears, but the private sectors can also be motivated to lend if terms are favourable since such lending would enjoy de jure seniority.  In any case there would not be much need for new money since debt standstills and exchange controls limit the drain on reserves and the policy adjustment by the country can be expected to improve the current account.

•             Negotiated debt restructuring including maturity extensions, rollovers etc, aided by CACs and other measures designed to restrain holdouts.  If financial meltdown is prevented through standstills and exchange controls, stay is imposed on litigation, adequate lender-in-possession financing is provided and contractual provisions are improved, the likelihood of reaching a negotiated debt workout would be very high in a large majority of cases.  A statutory cram-down should be the last resort.  It should be recognized that a statutory solution would intervene not only with creditors’ rights but also with sovereign rights of debtor countries.  In this respect the pros and cons of various options (international bankruptcy courts, ad hoc panels, arbitration, and a dispute settlement system along the lines of the WTO) should be carefully assessed.

 

Role of the IMF and the United Nations

  

The role of the IMF in crisis management and resolution is incontrovertible.  However, the IMF cannot be placed at the centre of IDWMs.  Even after a fundamental reform, the IMF Board cannot act as a sanctioning body and arbitrator because of conflict of interest; its members represent debtors and creditors.

   
However, independent statutory bodies and mechanisms can be established within the IMF (as in WTO) if its governance is significantly reformed.

 The United Nations successfully played an important role in crisis resolution in several instances in the past.

The Compensatory Financing Facility introduced in the early 1960s to enable developing countries facing liquidity problems due to temporary shortfalls in primary export earnings to draw on the Fund beyond their normal drawing rights at concessional terms resulted from a UN initiative.

Guidelines for negotiations of official and officially guaranteed debt of developing countries were effectively set at UNCTAD in 1980 through the adoption of TDB Resolution 222(XXI) which was seen by Michel Camdessus, the chairman of the Paris Club at the time, “as establishing the international legitimacy of the Paris Club within the international financial architecture.”

A more recent example concerns Iraq’s debt.  After the occupation of Iraq and collapse of the Saddam regime, the UN Security Council adopted a resolution (No 1483) to implement stay on the enforcement of creditor rights to use litigation to collect unpaid sovereign debt.  This was engineered by the very same country, the United States, which now denies a role to the UN in debt and finance on grounds that it lacks competence on such matters that mainly belong to the Bretton Woods Institutions.

More interestingly, that Security Council resolution on Iraq’s debt was duly complied with and implemented by the very same institutions, the IMF, World Bank and the Paris Club, which have refused to participate in these deliberations mandated by the General Assembly, presumably because they would not want to take guidance from the UN on debt restructuring.

 Author: Yılmaz Akyüz is the Chief Economist of the South Centre.

To view other articles in SouthNews, please click here. 

Dear colleagues
The update below may be of interest
Best regards,
Roberto Bissio
Coordinator, Social Watch International Secretariat
http://www.socialwatch.org/


https://www.globalpolicy.org/component/content/article/252-the-millenium-development-goals/52733-new-briefing-series-global-policy-watch-on-post-2015-and-ffd3-debates-begin-political-lines-emerge.html

Dear colleagues, 
 
The Global Coalition for Social Protection Floors promotes the right of all people residing in a country to social security, regardless of documentation. We promote social protection floors as key instruments to achieve the overarching social goal of the global development agenda. Social protection is one of the foundations for inclusive, equitable and sustainable development. It can simultaneously address the economic, social and environmental dimensions of sustainability and preservation of livelihoods.

We believe social protection floors can have a transformative role in contributing to long-term inclusive and sustainable growth while also enhancing resilience against natural and manmade disasters, as well as economic and social crises.

We subscribe to the fundamental goal of social justice upheld in the ILO Constitution and the Declaration of Philadelphia and its essential cornerstones as defined in Articles 22 to 26 of the Universal Declaration of Human Rights.

We believe that as this world becomes significantly richer, no woman, no man and no child need live in social insecurity, poverty and apprehension.

Join us: www.socialprotectionfloorscoalition.org

 

Dear Colleagues,

 This is my new briefing: The World Bank: In the vanguard of an infastructure boom (published by the Bretton Woods Project) which is based on my December report on "The emerging multi-polar world order": http://us.boell.org/sites/default/files/alexander_multi-polar_world_order_1.pdf

Warm regards,
Nancy

Nancy Alexander
Director, Economic Governance Program
Heinrich Boell Foundation
1432 K Street, #500
Washington, DC  20005-2540
Nancy.Alexander@us.boell.org
CHECK OUT OUR NEW WEB PAGE:
http://us.boell.org/categories/group-20-brics
OFFICE: 202-462-7512 x228

Dear John,

 thanks for sharing. The election in Greece might indeed open a (small) chance to reconsider austerity policies.  However this has to be discussed as a joint European  task. In that sense it is not helpful (as is done often in the German discourse) to blame the "irresponsible" deficit countries for the malaise, but German bashing  (increasingly popular among the austerity critics)  might also rather reinforce old prejudices then leading towards solutions. 

 Tried to make the case to think about new constructive engagement in Social Europe 
http://www.socialeurope.eu/2015/02/new-start-greece-opportunity-germany/

The attached declaration signed by all relevant German trade union leaders and a considerable number of researchers parliamentarians and activists might also be of interests.
http://wp.europa-neu-begruenden.de/griechenland-chance-fuer-europa/greece-after-the-election-not-a-threat-but-an-opportunity-for-europe/

Best regards,
Frank  Hoffer
ILO Bureau for Workers' Activities
International Labour Organization

Policy Partners-


Please see linked and below our press release on today's IMF Ebola debt relief announcement. We are grateful if you can share our release on twitter and Facebook and use the hashtags #Ebola and #IMF.
http://www.jubileeusa.org/press/press-item/article/imf-plan-offers-170-million-in-debt-relief-for-ebola-impacted-west-africa.html

Thanks,
Andy

 

Andrew Hanauer

Campaigns Director

Jubilee USA Network

(202) 783-3566 x100 / andrew@jubileeusa.org

www.jubileeusa.org / twitter / facebook / blog

Friends & colleagues --

A recent article of mine in OpenDemocracy discusses the appalling human cost of austerity policies in Europe.
https://www.opendemocracy.net/can-europe-make-it/john-weeks/recovery-delayed-is-recovery-denied-austerity-and-democracy-in-eu

John Weeks
Professor Emeritus and Senior Researcher at the Centre for Development Policy and Research
Research on Money and Finance Group at the School of Oriental & African Studies at the University of London.

Dear colleagues:

The excellent statements by our friends Salomon and Griffith-Jones on Greece have encouraged me to contribute a link. It is a paper published in Greece and presented in Athens in 2011
http://homepage.univie.ac.at/Kunibert.Raffer/Athens2011.pdf
proposing a proper, Rule-of-Law solution that takes justified concerns of the Human Rights Council into account.

Best regards

Kuni

Kunibert Raffer
Department of Economics, University of Vienna
Oskar-Morgenstern-Platz 1, A-1090 Vienna, Austria
Phone:+43 1 4277 374 ext. 18 (direct) or 01 or 05
Fax: +43 1 4277 9374
http://homepage.univie.ac.at/Kunibert.Raffer

Dear friends,

Spain’s failure to protect economic and social rights in times of economic crisis has come under stern criticism from other states at the country’s recent Universal Periodic Review (UPR) by the UN Human Rights Council. One after another, Spain’s peers in the community of nations voiced their concern over the erosion of economic and social rights after four years of ill-conceived austerity measures.  

Spain came under stern criticism, particularly with regard to economic and social rights, when it appeared before the Human Rights Council. Photo: Jean-Marc Ferré

The gravity of the deprivations evidenced in information provided by CESR and its national allies resulted in an unprecedented level of attention to economic and social rights concerns at the 21st session of the UPR in Geneva on 21 January.

A newly-published CESR factsheet illustrates the role Spain’s fiscal austerity policies have played in driving poverty and inequality in the country. The harsh impact of these retrogressive measures has been particularly felt among the most disadvantaged sectors, including women, children, older persons, people with disabilities and migrants. 

As CESR’s rigorous statistical analysis shows, four years of successive cuts in public spending have seriously undermined social services and social protection in the country.  Some 13 million people are now at risk of poverty and social exclusion in Spain - three million more than when the economic crisis first hit. Child poverty rates have escalated, while the gap between rich and poor is widening so fast that Spain is now one of the most unequal countries in Europe.

Over 30 UN member states raised economic and social rights concerns related to austerity measures in Spain. The discriminatory impact of health sector reforms -- particularly Royal Decree Law 16/2012 which excludes almost a million undocumented migrants from accessing healthcare services, save for very exceptional circumstances --  faced a broad chorus of disapproval.  Many voiced specific concern around the exclusion faced by migrants in health care, housing and education.   

States also drew attention to increasing poverty among children, and called on Spain to confront the obstacles facing victims and survivors of gender-based violence. As detailed in CESR’s factsheet, social security allocations for children and families has been cut by 91% since 2008, while the already meager provision to combat gender-based violence has also been reduced significantly.

Spain’s austerity-driven unemployment crisis was also a cause for major concern, with a series of countries calling for stronger measures to fulfil the right to decent work. Long-term unemployment and employment precarity have become chronic features of Spain’s economic landscape, with a quarter of the active population out of work overall and over 50% of young people jobless.

Particularly significant were the recommendations by states - echoing those of CESR and its partners - that Spain carry out a systematic assessment of the negative impacts of fiscal adjustments on economic and social rights, particularly for disadvantaged groups, and that it adopt measures to mitigate these.

Spain was also reminded that any austerity measures should be temporary, strictly necessary and proportionate, non-discriminatory and should ensure a social protection floor in line with government’s minimum core obligations. This represents a welcome invocation by member states of the human rights criteria on austerity issued by the UN Committee on Economic, Social and Cultural Rights following Spain’s appearance before that body in 2012. The Committee’s guidance came after a civil society coalition convened by CESR submitted detailed evidence to the Committee of the negative human rights impact of austerity measures in Spain.  CESR has been actively promoting and building on these criteria since then, including through guidelines drafted for the Council of Europe on safeguarding human rights in times of crisis.
 
The UPR recommendations follow those accepted by Spain following its 2010 UPR session, as well as those of several UN Special Rapporteurs and Independent Experts, along with European human rights bodies, who have voiced repeated concern about Spain’s austerity drive. Despite this, Spain has continued with harsh fiscal austerity measures centered on deep cuts to the budgets of key social sectors, without considering viable alternatives such as combating high levels of tax evasion, limiting tax privileges for large corporations and wealthy individuals, and putting in place other progressive and equitable taxation policies. CESR’s data suggests that Spain’s unfair tax regime is fuelling the country’s rampant levels of inequality.

In June 2015 Spain will again appear before the Human Rights Council to respond to the UPR recommendations. This represents a key opportunity for the government to heed the calls made by international human rights mechanisms and by civil society to address the harmful impact of retrogressive austerity measures and to ensure that human rights guide all aspects of its economic recovery strategies. 

Related publications:

• Visualizing Rights: Spain Factsheet
• Draft report of the Working Group on the Universal Periodic Review: Spain
• Safeguarding Human Rights in Times of Crisis

Best regards,
Nicholas Lusiani
Director, Human Rights in Economic Policy
Center for Economic and Social Rights (CESR)
Centro por los Derechos Económicos y Sociales
162 Montague St 
Brooklyn, NY 11201 USA
Email: nlusiani@cesr.org (Nicholas Lusiani)
Skype: nicholas.lusiani
Tel: +1 917 703 4963
Twitter: @NikoLusiani

Dear Colleagues,

In accordance with Professor Salomon, thank you for the interesting contributions circulated here. I take this opportunity to forward a paper about the importance on the direct application of the European Social Charter (ESC) by national courts.

Best regards.
Juliano Sarmento Barra
Université Paris 1 Panthéon-Sorbonne.
Département de Droit Social.
Institut de Recherche Juridique de la Sorbonne ? IRJS.
École doctorale de droit privé. UFR 12.
Mail:  Juliano-Sarmento.Barra@univ-paris1.fr
Mob. : +33 (0)6 89 55 86 70
Paris - France.
www.univ-paris1.fr