Dear colleagues,

For the first time in Europe a committee for an audit of the debt (with citizens’ participation) was set up under the auspices of a parliament. On Saturday 4 April the president of the Hellenic parliament Zoe Konstantopoulou opened the first official session creating a debt audit committee , also called committee for the truth about the debt - read more in our CADTM news.
Best regards,

Éric Toussaint
Senior Lecturer at the University of Liège,
President of CADTM Belgium (Committee for the Abolition of Third-World Debt)

www.cadtm.org/4-April-2015-a-landmark-in-the

Greece

4 April 2015: a landmark in the search for the truth about the Greek debt

by Eric Toussaint

6 April 2015

Zoe Konstantopoulou read the decree establishing the said committee consisting of Greek and foreign members and defined its essential mission, namely identifying what part of the Greek debt is illegal, illegitimate, odious or unsustainable, in other words establishing the truth about the Greek debt, providing their findings to the Hellenic parliament, the European parliament, to the national parliaments of the EU member States as well as to the Greek and international public opinion. Zoe K. recalled the suffering imposed on the Greek people by the creditors’ demands.

Next the President of the Republic, Prokopis Pavlopoulos, made a substantial speech supporting this major initiative. Prime Minister Alexis Tsipras and some ten other ministers were also present.

The President of the Hellenic parliament invited MEP Sofia Sakorafa to take the floor. She recounted the five year trial of all those who demand an audit of the debt so as to radically reduce it have been involved in.
Éric Toussaint, Scientific Coordinator of the international team within the committee summed up some of the questions for which the auditing committee will seek answers as it investigates the Greek debt.

The following ministers spoke up in turn: the Defence Minister Panos Kammenos (who is also President of the party of Independent Greeks); the Minister for Administrative Reforms George Katrougalos; the Minister of state for the struggle against corruption Panayotis Nikoloudis; the Minister of justice Nikos Paraskevopoulos; the Minister for European affairs Nikos Chountis; deputy defence Minister Costas Isychos; Finance Minister Yannis Varoufakis; the deputy Minister for culture Nikos Xydakis; the Minister of Infrastructure, Transport and Networks Christos Spirtzis.

The head of the Parliamentary Budget Office Panagiotis Liargkovas and the head of the Parliamentary Scientific Service Professor Pliakos also spoke.
All mentioned essential elements for a successful auditing of the Greek debt, and all committed their ministries or departments to actively supporting the project.

Afterwards three members of the auditing committee took the floor, namely Cephas Lumina, former United Nations Independent Expert on the effects of foreign debt on the full enjoyment of all human rights; Margot Salomon, Director of the Centre for the Study of Human Rights at the London School of Economics, and Maria Lucia Fattorelli, former member of the committee auditing the debt of Ecuador and Coordinator of the Citizen Debt Audit-Brazil.

The whole session, that lasted from 2 p.m. to 7.45 p.m., was broadcast live on the Hellenic parliament television channel, which is steadily winning more viewers in the country.
The audit committee will continue its investigation on Sunday, Monday and Tuesday.
The Sunday session started with jurist Georges Kasamatis’ intervention. It was broadcast by the Hellenic parliament television channel: http://www.hellenicparliament.gr/En... https://parltv.live.grnet.gr/webtv/

Eric Toussaint’s speech 4th April 2015 – Hellenic parliament The Committee will audit the Greek debt in the coming months, aimed at finding out whether part of the Greek public debt is illegitimate, illegal, odious or unsustainable.

Without claiming to be exhaustive, one can propose the following definitions:

1. Illegitimate public debt : debt that was contracted by a government without considering the public interest, a debt contracted in favour of a privileged minority.
2. Illegal debt : debt contracted in violation of the current legal or constitutional system.
3. Odious public debt : granted on conditions that violate fundamental human rights (the social, economic, cultural, civic, and political rights of the people).
4. Unsustainable public debt : debt that can only be paid back with dire consequences for the people such as a dramatic degradation of their living conditions, of access to health care or education, an increase in unemployment.

In short, debt that undermines basic human rights.

In other words, an unsustainable debt is a debt whose repayment makes it impossible for governments to guarantee to the population fundamental human rights (good public health system, good public educational system, good social protection system, decent wages and pensions, etc.)

Paragraph 9 of Article 7 of Regulation No 472/2013 of the European Parliament and of the Council of 21 May 2013 (which strongly undermines the sovereignty of the member States that have to implement adjustment policies) maintains that States subject to structural adjustment should carry out a complete audit of public debt in order to explain why indebtedness increased so sharply and to identify any irregularities. Here is the text in full: “A Member State subject to a macroeconomic adjustment programme shall carry out a comprehensive audit of its public finances in order, inter alia, to assess the reasons that led to the building up of excessive levels of debt as well as to track any possible irregularity”. |1|

Citizen participation is fundamental to a rigorous and independent audit process.

Here are some key questions that could be tackled by auditing the Greek debt.

Greek debt was at 113% of GDP in 2009 before the onset of the Greek crisis and the intervention by the IMF and the European institutions involved in the Memorandum reached 175% of GDP in 2014. How could we explain that? Are there irregularities in the huge increase of the debt?

The audit will analyse the legality and legitimacy of the so-called bail-out process.

Is it in conformity with European treaties (especially Article 125 of the Treaty on the Functioning of the EU, which prohibits EU countries from taking on the financial engagements of another EU country)?

Did it comply with normal EU decision making procedure?

Did the public lenders in 2010 (the 14 EU countries that granted Greece €53 billion of loans, the IMF, the ECB, the European Commission etc.) respect the full consent of the borrower, Greece, or was Greece acting under coercion?

Did these creditors impose one-sided conditions such as excessive interest rates on the loans? |2|
Did the 14 EU member States that each granted Greece a bilateral loan respect their own laws and constitutions, as well as those of Greece?

Another purpose is to audit the actions of the IMF. We know that at the IMF Executive Board meeting of 9 May 2010 several members of the IMF Executive Board (the Brazilian, the Swiss, the Argentine, the Indian, the Chinese members) had expressed considerable reservations regarding the loan granted by the IMF, pointing out, among other things, that Greece would not be able to repay it due to the policies that were being imposed on the country |3| . See the revelations made by The Wall Street Journal: http://blogs.wsj.com/economics/2013... See also: http://greece.greekreporter.com/201...

Recently, Paulo Nogueira Batista, one of the IMF’s executive directors, claims that all IMF board members knew that the loan was actually intended to save the French and German banks not Greece. |4| the revelations made by The Wall Street Journal: http://blogs.wsj.com/economics/2013... See also: http://greece.greekreporter.com/201...

Philippe Legrain, advisor to the President of the European Commission José Manuel Barroso in 2010 when the Troika granted its loan, specifies that ‘IMF decision makers were overruled by the IMF Managing Director of the time, Dominique Strauss-Kahn, who was then running for the French presidency and consequently wanted to prevent French banks from facing losses. Similarly German banks had persuaded Angela Merkel that it would be terrible if ever they should lose money. So the Eurozone governments decided to pretend that Greece was only facing temporary problems.’ They had to bypass ‘an essential principle in the Maastricht Treaty, namely the no-bail out clause. The loans to Athens were not intended to save Greece but the French and German banks that had been foolish enough to grant loans to an insolvent State.’

Private European banks were thus replaced by the Troika as Greece’s main creditor as from late 2010.

Did the ECB has respected its mandate?

The audit must also evaluate whether the strict conditions imposed on Greece by the Troika in exchange for the loans it received has respected their international human rights obligations - such as the right to health care, to education, housing, social security, to a fair wage, and also freedom of association and collective bargaining.

These rights are protected by a range of conventions or other instruments at international and European level, such as the Charter of Fundamental Rights of the European Union, the European Convention on Human Rights, the European Social Charter, the two UN Human Rights Covenants, the UN Charter, the UN Convention on the Rights of the Child, the UN Convention on the Rights of Persons with Disabilities, and also the basic conventions of the International Labour Organisation (ILO).

The audit will need to verify whether, as provided for in Regulation (EU) No. 472/2013 of the European Parliament and the Council of 21 May, 2013, mentioned above, “The draft macroeconomic adjustment programme… fully observe[s] Article 152 TFEU and Article 28 of the Charter of Fundamental Rights of the European Union.” The audit must also verify whether the following passage of the Regulation is adhered to: “The budgetary consolidation efforts set out in the macroeconomic adjustment programme shall take into account the need to ensure sufficient means for fundamental policies, such as education and health care.” It must also be determined whether the following fundamental principle of the Regulation has been applied: “Article 9 of the Treaty on the Functioning of the European Union (TFEU) provides that, in defining and implementing its policies and activities, the Union is to take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health.”

There are also 3 conditions proposed to define an odious debt

• lack of consent;
• lack of benefit to the population;
• awareness of the lenders.

Conclusions: The Committee will audit the Greek debt in the coming months, aimed at finding out whether part of the Greek public debt is illegitimate, illegal, odious or unsustainable.

notes articles:

|1| http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32013R0472

|2| The interest rates imposed in 2010-201 were between 4% and 5.5%. In 2012 they were, after protests (including from the Irish government who was also asked to pay high interest in 2010), reduced to 1%. Lowering the rate was a tacit acknowledgement by the 14 States that the interest rates were too high.

|3| See the revelations made by The Wall Street Journal: http://blogs.wsj.com/economics/2013/10/07/imf-document-excerpts-disagreements-revealed/ See also: http://greece.greekreporter.com/2013/10/08/secret-imf-report-shows-greek-bailout-worries/

|4| http://www.marianne.net/on-renfloue-grece-sauver-les-banques-francaises-allemandes-100231807.html

Post-2015: Measuring the (real) scope of ambition

Barbara Adams, Gretchen Luchsinger

The post-2015 development agenda aspires to global transformation. Its content so far, including the set of 17 sustainable development goals (SDGs) agreed in last year’s Open Working Group, affirms that aim through an unprecedented commitment to inclusion, sustainability and universality. This suggests that the world might finally move beyond current imbalanced patterns of consumption and production that have left wide swathes of human deprivation and pushed the limits of planetary boundaries.

Yet the main question, after the most recent intergovernmental negotiations on the agenda in March in New York, is: will the political process live up to the agenda’s promise? It is still early days in forging global consensus, but given the stakes at hand, momentum is critical. Will governments and all other actors exercise the kind of visionary leadership and risk-taking that transformation demands? Or will they fall back on protecting familiar vested interests and avoid risk by seeking easier, quicker agreement? Does the calculation of political risk overwhelm the very urgent imperative to take serious action on urgent issues—namely, the long-term survival of people and the planet?

Eyes on the issues, via process and politics

Many issues are essential to the sustainable development agenda. There are clear rationales for singling out actions on gender equality, labour rights, quality health and education services, the conservation of oceans, clean and accessible energy and so on. There are technical aspects related to advancing and measuring progress on each. But what do all have in common beyond being integral—and integrated—elements of a sustainable development agenda? All depend on deep-seated political commitment to transformative change, as should be reflected in the post-2015 negotiations.

This commitment needs to be rooted in genuine fairness and cooperation, because transformation, in a real sense, will require people to work together, to move beyond just their own interests, and to share limited resources in a far more equitable manner. Without these shifts, and the significant redirections in global political and economic dynamics they imply, progress on any issue, from reducing poverty to saving forests, will automatically be constrained, and probably not sustainable.

The most recent round of negotiations suggested this understanding was not quite in play among all delegates. Some sought to switch the narrative mainly to national or narrow issue interests, and away from global ones. They know that from here on, containing the agenda means controlling the scope of the outcome.

Thwarted ambition?

The March session was dedicated to the post-2015 goals, targets and indicators. Much of the week was spent on intensive talks around whether or not to reopen negotiations on the targets affirmed by the Open Working Group for the 17 SDGs. Rich countries mostly pushed for reopening; developing countries opposed this as threatening the “delicate political balance” crafted last year. Among 169 previously agreed targets, the rich country argument centred on 19 for which the UN Secretariat had suggested technical “improvements.” These covered filling some remaining gaps marked by placeholder “x’s” and adjusting language inconsistent with or weaker than existing international agreements. A few rich countries went beyond the 19 and suggested that many other targets should also be improved, contending that the post-2015 agenda needs to be as ambitious as possible, and therefore should be guided by the most ambitious targets.

But was this really about ambition? The Open Working Group agreement took many months of hard negotiations to conclude. Only a few months remain before the September Summit, where heads of state and government will descend on New York to endorse the final post-2015 agenda.

Is it possible that some rich countries pushed as far as they did on opening the agenda so that developing countries would dig in and resist all attempts to do so? This approach to making global agreements protects the “delicate political balance,” but reduces prospects for collaboration to fine-tune the targets and possibly to reach agreement at the Third Conference on Financing for Development.

A dose of essential medicine

The calls for being ambitious in some instances attempted to hide the reality of a lack of ambition—perhaps from a concern late in the game that the post-2015 agenda goes too far, at least from the perspective of some vested interests. Rich countries urged alignment with existing international standards—fair enough. Who wants to backtrack? Except… behind the scenes some were insisting on maintaining a reference to access to “essential” medicines and obstructing a broader reference to medicines in general that would have brought target language in line with the 2001 Doha Declaration.

Worth keeping in mind is that revenues for global pharmaceutical companies, mostly based in rich countries, have soared from $390 billion in 2001 to nearly $1 trillion in 2013, approximately the period of the MDGs. These companies currently spend much more on selling products than researching new drugs, focus little attention on diseases afflicting poorer people and countries, and, if patterns across transnational corporations hold, pay a scant amount towards the taxes developing countries need to provide essential services. Can we talk about transformation and ambition if the idea is just a kind of MDG+, where developing countries are expected to improve their health systems, somehow, without sufficient resources and affordable access to all medicines? What might transformation look like if it began with those who have a highly disproportionate share of resources, rather than with those without enough for the basics of development?

An indicator of what’s ahead

Delegates agreed that the process of defining indicators under each of the 169 targets should be taken up by the UN Statistics Commission, with completion of the work expected in the first part of 2016. As many pointed out, designing correct indicators is a technical process that requires statistical expertise, amply provided by the national statisticians who sit on the commission.

Yet indicators are also political, including through their selection, which explains the multiple calls to ensure political oversight of the commission’s work. Postponing indicator selection to 2016 means that they will be decided outside the global spotlight currently shining on the post-2015 agenda. Countries intent on reducing their commitments and responsibilities could use the process for backdoor “re-engineering.” Alternatively, lower political pressure could provide opportunities to improve the quality and ambition of the agenda. Whether the choice becomes to scale up or scale down, measurement will largely determine what’s visible, what’s financed, who’s accountable, and what can actually be claimed as progress (or the opposite).

Many areas of the sustainable development agenda have not yet been measured, but that does not mean that they cannot be measured—in some cases, the obstacles are as much political as technical. Similarly, many statistical offices especially in poorer countries have low capacities—one delegate described how enacting the much simpler set of MDG indicators took 11 years. But capacities can be developed with adequate support, particularly from those with the greatest ability (and responsibility) to provide assistance. The indicators are, again, a chance for aiming high—or remaining stuck in the status quo.

A few good ideas…

Since the post-2015 agenda is universal, it will call on rich countries, for the first time, to report to the United Nations on progress under each of the targets and indicators. The March session saw a number of rich countries starting to describe their plans to implement the agenda within their own borders. Their presentations included acknowledgment that a paradigm shift is at work, and that they need to take steps including to improve their own statistical capacities—providing an unusual “leveling” sense of how all countries, rich and poor, face some similar issues. Presentations by diverse developing countries injected a further note of optimism, with some already well advanced in integrating the SDGs in national planning.

Another positive was repeated emphasis on the integrated nature of the post-2015 agenda—beyond the so-called “delicate political balance,” many people realize that while the agenda may feel messy and complex at times, all issues must be dealt with together. Some calls to simplify and aggregate indicators were met by equally strong voices emphasizing that even if it requires more time and resources, disaggregation is critical to making everyone and every issue visible. One developing country delegate underscored that the real point is to start looking at causes, not just symptoms.

What’s Not on the Agenda?

While rich countries have started to talk about how they will implement the post-2015 agenda, their focus is almost exclusively on actions they will take at home—to improve gender equality, reduce food waste, green the economy and reduce child poverty, for example—and on how they will spend foreign aid budgets. But if the goal is transformation, rich countries need to act equally on the principle of do no harm, and embrace a broader notion of international responsibility. Do no harm is contradicted by current global spillover effects from tax evasion and currency manipulation, to cite just two examples. International responsibility is not just about aid, but about addressing systemic obstacles, such as undemocratic international financial governance and a lack of financial regulation. For more, see Goals for the Rich.

Unpacking a Word…

Technical. It sounds desirable, coming with the imprimatur of evidence and scientific purpose. The word has been used often in discussing the alignment of goals, targets and indicators in the post-2015 agenda. And yet, in an environment where trust is shaky, the technical easily verges on the political. A proposed technical proofing of the targets soon became referred to as a political proofing by developing country delegates, aware of how political choices were being made through the language and selection of the targets and indicators.

Rich countries repeatedly claimed to be upholding high technical standards, but here’s how that can work. One such delegate suggested making “meaningful technical improvements” to a target on development-oriented policies that support productive activities. He first defined this as being about an enabling business environment, and then proposed a new target with a number for new business start-ups, cutting out previous references to development and decent job creation. He argued for being clear and precise.

There is, however, a great deal of clarity about how starting businesses does not automatically translate into enough decent jobs. Precision, at least in terms of alignment with the post-2015 agenda, requires making the link between business growth and employment, because the point is not just to create new enterprises and hope for trickle down, but to reduce poverty and inequalities, and improve human well-being—decent jobs being basic requirements for all these aims. For more on decent work, see the most recent ECOSOC Integration Segment.

Looking ahead to FfD3

The next post-2015 session (20-24 April) will take up the issue of means of implementation, on the heels of the first round of negotiations on the draft outcome document for the Third Conference on Financing for Development (13-17 April). Each of the first 16 SDGs includes targets on means of implementation; the 17th goal is about strengthening the means of implementation overall, through targets on finance, technology and capacity building, among others.

There is currently a lack of clarity on how the two processes intersect. What is clear is that the structure of the global economy—which determines the flow of finance, investment, technology, capacities, and so on—will define the success or failure of the goals. Some rich countries would like to incorporate the FfD3 outcome agreement as the means of implementation “pillar” of post-2015; many developing countries fear this could potentially undermine the means specified under each goal. It could also dilute the scope of the FfD3 agreement, which has a mandate beyond the SDGs, and places stronger and more detailed emphasis on systemic, structural issues.

The post-2015 agenda, for example, currently talks about improving domestic tax capacity—in part to pay for the many public services essential to a variety of the SDGs. FfD3 provides scope for moving efforts to stem illicit financial flows, 80 percent of which are due to tax evasion, outside the Organisation for Economic Co-operation and Development and into a more democratic and globally representative UN Tax Commission.

The post-2015 agenda calls for addressing the external debt of poor countries, which can soak up resources that might otherwise go towards development. FfD3 could establish a debt workout mechanism that is situated in a neutral, intergovernmental forum, rather than being run by creditors, unbound by responsible lending principles, as is current practice.

Looking forward to FfD3, some issues to keep an eye on include discussions around access to countercyclical finance during downturns in order to stimulate recovery. The concept of the global partnership for sustainable development could be more precise in defining the roles and obligations of different actors, and upholding the central roles of states.

Definition is particularly needed for the private sector, where current incentive structures more often than not undercut sustainable development. Businesses may make logical partners for some infrastructure projects. Their activities can also be the source of financial instability and crisis, not to mention many social and environmental ills. For their part, private foundations, while offering an influx of new funds in recent years, have run up against criticisms that they distort public programmes with little in the way of accountability beyond their own boards.


What’s Happening Next

Post–2015 negotiations

• 20–24 April: Means of implementation and global partnership for sustainable development
• 18–22 May: Follow–up and review
• 22–25 June: Intergovernmental negotiations on the outcome document
• 6-8 July: High-level Political Forum, “Strengthening integration, implementation and review—the HLPF after 2015”
• 6-10 July: ECOSOC High-level Segment, “Managing the transition from the Millennium Development Goals to the sustainable development goals: What will it take?”
• 20-24 July, 27-31 July: Intergovernmental negotiations on the outcome document
• 25-27 September: UN Summit: “Delivering on and Implementing a Transformative Post-2015 Development Agenda”

FfD3 negotiations

• 8-9 April: Civil Society and Business Sector Hearings
• 8-10 April: Development Cooperation Forum, “Development cooperation for people and planet: What will it take?”
• 13–17 April: Intergovernmental negotiations on the outcome document
• 15–19 June: Intergovernmental negotiations on the outcome document
• 13–16 July: 3rd Conference on Financing for Development

To Find Out More

• UN Sustainable Development Knowledge Platform
• Proposals for the SDGs
• Financing for Development III: official website
• Statistics Commission
• ECOSOC Integration Segment
• The Reflection Group

Goals for the rich

Dear all,

Sharing below link to a blog posted by the colleagues at the UK TUC:

http://touchstoneblog.org.uk/2015/04/a-cautionary-tale-pension-funds-and-the-infrastructure-bandwagon/ 

Best,

Aldo Caliari
Director
Rethinking Bretton Woods Project
Center of Concern

Hello all. Thanks to Thomas and Selim for their very interesting texts and attachments/links.

It is not a surprise that The individual Deprivation Measure is not included in Lin Yang's Inventory of Composite Measures of Human Progress, as this inventory only includes 5 measures classified under the entry Poverty, three of them carried out by UNDP.

Imitating Thomas, I dare to send all of you two attachments containing chapters 4 and 5 of a draft book on which I am still working. Chapter 4 contains a Typology of Poverty Measurement Methods, with emphasis on combined (i.e. containing both income and direct indicators of deprivation) multidimensional methods. Chapter 5 is called Principles of Multidimensional Poverty. These principles I have applied for my IPMM (Integrated Poverty Measurement Method) which I developed at the beginning of the nineties and have been applying (and improving) since then. This method is explained in the last section of chapter 4. The typology contained has not (yet) been actualised to include Alkire-Santos method now used by UNDP.

I beg all of you to send me commentaries, suggestions, critiques that will be of great help in preparing the last version of these chapters.

Julio Boltvinik    
   
Julio Botvinik
Professor at El Colegio de México, Mexico City
www.julioboltvinik.org

Dear friends and colleagues,

I would like to call your attention a Debt and Development Coalition Ireland report released this week (which I authored). The report deals with Argentina's experience with debt, default and restructuring and vulture funds. The report also discusses different proposals for dealing with sovereign defaults. Those interested can find the report at:

http://www.debtireland.org/news/2015/03/26/new-report-now-online-towards-justice-centred-debt/
Alan
--

Alan Cibils
Investigador Docente
Coordinador Área de Economía Política
Instituto de Industria
Universidad Nacional de General Sarmiento http://www.ungs.edu.ar/ecopol/
(+54-11) 4469-7500, int/ext: 7282

Dear all,

We are pleased to share with you a new paper titled "The Post-2015 Corporate Development Agenda: Expanding Corporate Power in the Name of Sustainable Development."  The paper discusses how the corporate sector is trying to position itself front and center of the post-2015 development agenda by staking a claim at three levels: First, by setting goals that would suit their priorities for expansion; second, by claiming a primary role in mobilizing the means for implementing these goals; third, by shaping the governance framework that would be set-up to ensure progress in this agenda.

The paper warns that the danger lies not only in the failure of the post-2015 agenda to promote transformative change, but also in the prospect of rationalizing and legitimizing the further expansion of corporate power in the guise of promoting sustainability and addressing the needs of the poor.

Download the paper at the CPG website through this link http://bit.ly/1GsBKtV

Thank you.

 

--

Paul Quintos
IBON International
3rd Flr., IBON Center
114 Timog Avenue,
Quezon City 1103
Philippines
Telefax: +63 2 9276981
Skype ID: paul.quintos
Websites: iboninternational.org
peoplesgoals.org

Dear colleagues

From our CADTM news
Best regards,

Éric Toussaint
Senior Lecturer at the University of Liège,
President of CADTM Belgium (Committee for the Abolition of Third-World Debt)

www.cadtm.org/The-Speaker-of-the-Greek

by CADTM

20 March 2015

The Speaker of the Greek parliament launches a debt audit commission

The Speaker of the Greek parliament, Zoé Konstantopoulou, has announced during a press conference on 17 March 2015 the creation of a commission to audit the Greek debt. The scientific coordination of the commission will be led by Eric Toussaint, Spokesman for CADTM and a member of the Ecuadorian debt audit Commission that sat in 2007-2008. “The purpose is to identify any debts taken on by the Greek government that may have an illegal, illegitimate or odious nature,” the Greek people “has the right to demand that any part of the Greek debt that may eventually be shown to be illegal – be erased,” declared the Greek Parliament’s Speaker.

Also present at the press conference was Sofia Sakorafa, SYRIZA elected MEP (since 2014), who accepted to be the newly formed committee’s liaison with the European Parliament. Sofia Sakorafa quit the PASOK party in 2010 when George Papandreou pushed through the memorandum signed conjointly with the Troika. Already in December 2010 as a Greek MP she was favourable to a proposition to create a debt audit. In 2011, she took part in launching a committee for the citizen’s audit of Greek debt (ELE). In 2012 she was the the Greek MP, all parties considered, elected with the highest number of votes. Georges Katrougalos, Minister for institutional reform was also present at the press conference to bring his support to the Parliamentary Speaker’s initiative. Georges Katrougalos had also participated in the launching of ELE. Finally, the Parliamentary Speakerhailed the presence of ELE members: Moisis Litsis, Sonia and Giorgos Mitralias ( CADTM Greece), and Leonidas Vatikiodis (one of the authors of the films Debtocracy and Catastroïka).

The Greek, as well as French and Spanish, media have widely reported this press conference:(Le Monde, Le Soir, L’Echo, L’Avenir, Agence France Presse...), as well as publicly run radio stations in Belgium and Romansh Switzerland. The one o’clock news on the Belgian public radio and television service broadcast an interview with Eric Toussaint live from Syndagma place in Athens just after the press conference (can be seen here).

In all, about thirty Greek and International experts will take part in the commission and a preliminary report is expected in June. “Either when the 20 February agreement comes to termination or when a new round of negotiations will start”, says Adea Guillot, permanent correspondant to Le Soir and Le Monde. Not all of the names of the commission members will not be known until the first meeting in early April. From April to June is not much time but that will only be the beginning. Eric Toussaint said in an interview given to the Belgian financial newspaper L’Echo “We will make a preliminary report in June mostly concerning the debt claimed by the Troika, now called the ’Institutions’, but the whole audit will probably take until December 2015. The goal of the commission is to show to the Greek people, by deep reaching analysis, the nature of the loans made to Greece. This matter is urgent, the Greek people are being stigmatised”.

Zoé Konstantopoulou is already being accused by different Greek political parties (New Democracy, PASOK and Potami) of fanning the flames of dissent. But this woman, who has an enormous capacity for work (http://www.lemonde.fr/international... ), will keep going. “A whole people has been pushed to its knees and we cannot accept to be subjected to such propaganda (…) We have a duty to act or this debt will burden our future generations.”

In any case the Debt Audit Commission is not a substitute for the Greek government who will decide which debts should be paid and which debts should be erased. Again as Adea Guillot remarked: “Once the result of the audit is known, and should it conclude that a part of the Greek debt is illegitimate, nothing will oblige the creditors to accept pure and simple write-offs of their loans. But ’the Greek government could take the sovereign decision not to pay’, says Eric Toussaint. ’Our commission seeks to provide solid and rational arguments to support the Greek government should it take this course of action’, he added”.

Dear colleagues,

On the 18th March, the Public Services International Research Unit (PSIRU) hosted a side event in New York to promote the report “Why Public-Private-Partnerships don’t work”. The report assessed the impact of Public-Private Partnerships (PPPs) actually undertaken in rich and poor countries. These global case studies show that there is no evidence that PPPs are cheaper or more convenient for governments in the long-term.

Public Private Partnerships (PPPs) are essentially a government service or private business venture which is funded and operated through a long-term agreement between government and private sector companies. These can come in different forms, from building roads or schools at a small scale, or even electricity grids on a larger scale. There are several reasons why these partnerships can be beneficial. Governments often are under strict controls and regulations for how public funds are spent and sometimes do not have the capacity or resources to initiate or maintain various services. In contrast, private sector companies often have access to such resources, including large investment capital, and have the capacity to undertake larger scale projects. A private partner delivers and funds public services using a capital asset, sharing the associated risk.

The private sector are not willing to invest unless they think they will get a return on their investment. They are for profit and as such it is understandable that the private sector prefer to finance lucrative infrastructure projects. Agreements also allow the private sector to sue the government if they appear to be competing with them --an example given was when drivers avoid a toll road by taking backroads and the villagers get the local authorities to fix or expand that road. The local authorities then got sued by the company who made the toll road for loss of earnings. The report “Why Public-Private-Partnerships don’t work” provides numerous case studies of where PPPs proved to be costly, did not bring new money, masked corruption, and distorted policy priorities. But as one speaker noted, “Shouldn’t we be suspicious when the private sector comes with a bag of money to solve our problems?”

The report provides evidence that far from being a solution for countries under fiscal constraints, PPPs can instead “worsen fiscal problems”, as in the cases of Cyprus, Greece, Ireland, Portugal, Spain and the UK. Such arrangements can legally lock governments into agreements that they don’t profit from, yet assume the majority of the risk. For example, India is using public finance to “bail out existing PPPs which are now unable to find private finance”.

Globally, international consultant firms, are promoting PPPs as a solution to public development financing. The PSIRU report disproves a significant amount of the existing reports or forecasts on why PPPs are a good alternative to public funding. For example, in 2007 McKinsey published a report which “claimed the private sector could provide over half of the $30 billion investment needed to develop healthcare in Africa over the next 10 years… but by 2012 it had resulted in almost no private finance.” (p21). PPPs thus appear counterproductive, expensive and an inefficient. The question remains: are PPPs instrumental in facilitating corruption or push debts beyond political cycles, and who is responsible for monitoring this?

Another consideration is whether PPPs are merely an “accounting trick”, a way for governments to navigate around their own constraints on public borrowing while providing long-term state guarantees for profits to private companies. It is clear that for the Post-2015 Development Agenda to succeed, there will need to be both adequate funding for implementation and the political commitment to change. At an international level, there appears to be a focus on partnering with the private sector as a potential solution to the emerging financing gap of “ambitious aspirations” to develop sustainably and the political commitment, but whether PPPs are the best solution to this remains in question. However, in an environment where sovereign debt is growing and there are stricter controls on public borrowing, should PPPs be a used as a stopgap solution for governments?

According to the discussion in the side event and the PSIRU report, it seems that the common taxpayer bears the brunt of paying for services that should be funded with public finance and paying for the fallout when things do not go as planned. Despite this, PPPs continue to be promoted by international financial institutions, such as the G20 and OECD, and are even being considered in intergovernmental negotiations at the UN for the Sustainable Development Goals and Financing for Development (Zero Draft Report para 52).

It remains unclear why so much emphasis is being placed on PPPs. Questions regarding the political commitment to achieving change remain and there is the ever growing concern that PPPs may just be another way of repackaging special interest and maintaining the status quo.

Best regards
Sabá Loftus
Social Watch

Read more:

Report: Why Public-Private-Partnerships don’t work
Financing for Development Zero Draft
Why fighting illicit capital is not a priority?
Goals for the Rich: Indispensable for a Universal Post-2015 Agenda Discussion Paper
OECD Principles for Public Governance of Public-Private Partnerships

Dear colleagues,

 

LAST WEEK, The US criticized the British government for its “constant accommodation” of China, the latest example of which would be the UK’s decision to become a founding member of a regional initiative announced last year in Beijing to create an Asian Infrastructure Investment Bank (AIIB). Other than worries about British accommodation of China expressed to the Financial Times by “a senior US official”, an official statement from the White House expressed these concerns:

 

“We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks… Based on many discussions, we have concerns about whether the AIIB will meet these high standards, particularly related to governance, and environmental and social safeguards… The international community has a stake in seeing the AIIB complement the existing architecture, and to work effectively alongside the World Bank and Asian Development Bank.”

 

It should be noted, however, that the Asian Development Bank is not among the regional banks that have adopted a full-fledged labour safeguard requiring compliance with the ILO’s core labour standards. Only the European Bank for Reconstruction and Development and the African Development Bank have done that.

 

The World Bank, which is currently revising its social and environmental safeguards policies, has been heavily criticized by trade unions and CSOs for not requiring full compliance with CLS in the first draft of its new policy and for excluding most workers by exempting contractors. The policy is currently being redrafted and will be made public later this year.

 

An article in the Guardian (worth looking at for the photo alone) is available here:

http://www.theguardian.com/us-news/2015/mar/13/white-house-pointedly-asks-uk-to-use-its-voice-as-part-of-chinese-led-bank

 

More coverage and comment is in the Financial Times:

“US attacks UK’s ‘constant accommodation’ with China”

http://www.ft.com/intl/cms/s/0/31c4880a-c8d2-11e4-bc64-00144feab7de.html

 

THIS WEEK, the governments of three additional European countries – France, Germany and Italy – have stated that they will join the Asian Infrastructure Investment Bank (AIIB) in spite of US  lobbying for its allies not the join the Chinese-led initiative. The UK announced its intention to join the AIIB last week.

 

The three EU countries issued a joint communiqué in which they state that they are “keen to work with the AIIB founding members to establish an institution that follows the best standards and practices in terms of governance, safeguards, debt and procurement policies”.

 

It may be noted that France, Germany and Italy have strongly supported the adoption of a comprehensive labour standards safeguard by the World Bank as advocated by the ITUC and Global Unions, and have voiced agreement with the ITUC’s critique of the weak draft labour safeguard currently under consideration by the World Bank, as has the UK. They also supported the adoption of comprehensive labour safeguards by the European Bank for Reconstruction and Development and the African Development Bank, which took place in 2008 and 2013 respectively.

 

A key feature of these safeguards is the requirement that bank-funded activities must comply with the ILO’s core labour standards. One hopes that these governments will show consistency and demand the adoption of similar protections for workers in projects financed by the AIIB.

A detailed article on the European countries’ stance vis-à-vis the new AIIB is in today’s New York Times:

http://www.nytimes.com/2015/03/18/business/france-germany-and-italy-join-asian-infrastructure-investment-bank.html

Best regards,

Peter Bakvis
ITUC/Global Unions – Washington Office
888 16th Street NW
Washington, DC 20006
Tel: (202) 974-8120
E-mail: pbakvis@globalunions-us.org

Dear colleagues,

2015 marks 25 years since the first Human Development Report introduced a new approach for advancing human flourishing. The expression “human development” is likely familiar; it is understood and used in different ways around the world. Measuring the human progress and well-being has itself becoming an industry: last year the Human Development Report Office (HDRO) listed over a hundred indices currently used to measure some aspect, or aspects, of human progress -wellbeing, happiness, peace.

Human development grew out of global discussions on the links between economic growth and development in the 1980s. In previous decades, GDP and economic growth emerged as leading indicator of national progress in many countries, yet GDP was never intended to be used as a measure of wellbeing. In the 1970s and 80s the development debate considered using alternative focuses, including giving greater emphasis on employment, followed by redistribution with growth, whether people had their basic needs met and structural adjustment with a human face.

These ideas helped pave the way for the human development approach, about expanding the richness of human life, rather than simply the richness of the economy in which people live.

One of the more important achievements of the human development approach, as embodied in successive Human Development Reports, has been the growing acceptance that money-metric measures, such as GDP per capita, are inadequate proxies of development. The first Human Development Report introduced the Human Development Index (HDI) as a measure of achievement in the basic dimensions of human development and it has become widely accepted in development discourse.

Over the years, some modifications and refinements have been made to the HDI. Indeed, the critics of the index and their concerns are stimulating refinements to the index and the development of companion indices which help paint a broader picture of global human development. However, the HDI has been subject to criticism that questions its validity. In this context, it is important to understand its nature and what is it and what is not.

The Human Development Index (HDI) was a pioneer and remains one of the – if not the – most influential indices in development debate. It was constructed as a focus measure, or a composite index, and as such concentrates on some basic dimensions of human development: it is an equally weighted average weighted (each dimension given the weight of 1) of a nation’s longevity, education and standard of living (income per capita).

By definition, composite indices provide a single number to synthesize the state of affairs, but cannot provide a comprehensive picture of the state of human development as other measures such as Human Development Accounting does.

Three things prompted to come up with the HDI as measure:

·         First, the HDI captures these basic dimensions of human development: lead a long and healthy life, acquire knowledge and have access to resources needed for a decent standard of living. Without them, many other opportunities remain inaccessible.

·         Second, if only breadth measures of human development are presented, people will revert to GDP per capita for a single measure of development. The HDI changed that outlook.

·         Third, for measuring human well-being, one needs as vulgar but not as narrow a measure like income per capita, which is blind to broader aspects of human lives. The HDI provides a broader measure.

Five observations are therefore quite pertinent about the HDI:

·         First, the HDI is not a comprehensive measure of human development. It just focuses on the basic dimensions but does not take into account a number of other important ones.

·         Second, it is composed of long-term human development outcomes. Thus it does not reflect the input efforts in terms of policies nor can it measure short-term achievements.

·         Third, it shares all the limitations of composite measures. But keeping it simple ensures its acceptability, understanding and predictability.

·         Fourth, the HDI is an average measure and thus masks a series of disparities and inequalities within countries. Disaggregation of the HDI in terms of gender, regions and ethnic groups can be and has been used widely for policy formulation, at the country level.

·         Fifth, income enters into the HDI as a proxy for resources needed to have a decent standard of living - how it is transformed into the health and education dimensions of the HDI.

Any suggested measure for any concept cannot fully capture the richness, the breadth and the depth of the concept itself. This is true of the notion of human development as well. The HDI cannot provide a complete picture of human development in any situation. It has to be supplemented with other useful indicators (a dashboard) in order to get a more comprehensive view. However, as a focus measure, it has been successful for advocacy, for initiating healthy competition among societies and for raising awareness.

If a metaphor is used, human development accounting represents a house and the HDI is the door to the house. One should not mistake the door to be the house and one should not stop at the door, rather one should enter the house.

Best regards,

Selim Jahan
Director
Human Development Report Office
United Nations Development Programme

Dear friends and colleagues,

See the link to my latest column for the CBC on a quick comparison of Canadian and American labour markets.

Thank you

LINK: http://www.cbc.ca/news/canada/manitoba/a-tale-of-2-economies-making-sense-of-u-s-and-canadian-labour-market-data-1.2995923


Louis-Philippe Rochon
Associate Professor
Department of Economics
Room A350
Laurentian University / Université Laurentienne
935 Ramsey Road
Sudbury, Ontario
CANADA P3E 2C6

Director, International Economic Policy Institute
Editor, Review of Keynesian Economics 

Dear colleagues
This update on the Post2015 agenda and the Financing for Development processes may be of interest 
https://www.globalpolicywatch.org/the-2015-declaration-meeting/
Best regards,
Roberto Bissio 
Coordinator, Social Watch International 
http://www.socialwatch.org/

Here is my brief contribution on German debts. 

http://alainet.org/active/81064&lang=es

A deep analysis of inter allied war debts can be read in my latest Arquitectura Financiera Internacional: genealogia 1850-2008, IIEC UNAM, 2014. Eveyone seems to forget European countries have been the ones that have received the most debt reductions in terms of GDP after WWI.

Regards

Dr. Oscar Ugarteche
Instituto de Investigaciones Económicas
UNAM
Oficina I 120
Circuito Mario de ls Cueva. s/n
Ciudad universitaria, Coyoacán
México DF
04510
Coordinador OBELA
www.obela.org

Dear friends,

Here is an interview on the cancellation of German debts and Greece – more materials in CADTM website http://cadtm.org/English.

You may want to subscribe to our newsletter  https://listes.domainepublic.net/listinfo/cadtm-newsletter-en

Best regards

Eric Toussaint
www.cadtm.org
345 Avenue de l'Observatoire
4000 Liège
Belgique

On 9 March 2015 the Independent Expert on foreign debt and human rights, Juan Pablo Boholslavsky, will present a study on "Illicit financial flows, human rights and the post 2015 development agenda of the United Nations", a thematic report on "Financial Complicity: lending to States involved in gross human rights violations" and a report on his fact-finding mission to Iceland to the 28th session of the Human Rights Council in Geneva.  

In the context of the renewed international attention on the financial and social crisis in Greece, Mr. Boholslavsky's  report on his visit to Iceland is of wider interest, showing how the Nordic country dealt with the 2008 banking collapse in an overwhelmingly human rights compliant manner, while pointing at certain gaps that should be addressed.

The interactive dialogue of the Independent Expert at the Human Rights Council with representatives of States and non-governmental organizations on the above reports is scheduled on 9 March 2015 from 9-12 AM, Geneva time (CET),  and can be viewed on the webcast of the Human Rights Council. Information about accreditation for NGOs and National Human Rights Institutions is accessible here.

Below, summaries of key findings of the reports

Illicit financial flows, human rights and the post 2015 development agenda of the United Nations

The interim study of the Independent Expert (A/HRC/28/60) underlines that illicit financial flows generated from crime, corruption, embezzlement and tax evasion represent a major drain on the resources of developing countries, reducing tax revenues and the scope for progressive taxation, hindering development and the rule of law, exacerbating poverty and inequality, and undermining the enjoyment of human rights. According to some estimations developing countries lost US$ 991 billion in illicit financial outflows in 2012 and those flows increased in real terms at a rate of 9.4 per cent per annum over the period 2003–2012. The annual loss is substantially more than the estimated yearly costs of achieving the Millennium Development Goals. The study emphasizes the need for due diligence and due process in the fight against illicit financial flows, for better protection of witnesses and whistle-blowers and for incorporating human rights considerations in the management of returned stolen assets. It concludes with recommendations to States on how the goal of curbing illicit financial flows could be operationalized within the post-2015 development agenda of the United Nations.  The Independent Expert recommends inter alia to:

• Include a goal to reduce illicit financial flows in the final set of sustainable development goals, anchoring that goal in the context of good governance, the rule of law, justice and the duty of States to respect, protect and fulfil human rights;
• Complement such an overarching goal with measurable targets and indicators to ensure accountability for implementation, including specified percentage targets to reduce trade- and tax-based illicit financial flows by 2030;
• Enhance transparency by reducing to zero by 2030: (i) the number of legal persons and arrangements for which beneficial ownership information is not publicly available; (ii) the number of cross-border trade and investment relationships between jurisdictions where there is no automatic exchange of tax information; and (iii) the number of transnational business corporations that do not report publicly on a country-by-country basis.

Read his study on illicit financial flows

Financial Complicity: lending to States involved in gross human rights violations

Does lending to States involved in gross human rights violations help to reduce or does it exacerbate the likelihood for further commission of international crimes? Not an easy question and an issue  that has been discussed controversially at the United Nations since many years, initially when the international community was confronted during the 1960s with racist regimes  in Southern Africa systematically violating human rights. The report (A/HRC/28/59) intends to contribute to a better understanding of when financial support may contribute to, or sustain the commission of, large-scale gross human rights violations by sketching a rational choice framework premised on the incentives of authoritarian Governments and private and official lenders. In the report, the Independent Expert reviews the existing empirical evidence of the relationship between sovereign financing, human rights practices and the consolidation of Governments engaged in gross violations of human rights. Finally, the Independent Expert presents some interim conclusions and invites stakeholders to discuss them.

Read his report on financial complicity

States and international financial institutions can learn from Iceland's response to the banking crisis

To what extent has Iceland fulfilled its obligations to secure economic, social and cultural rights in the aftermath of its recent financial banking crisis? The report of the Independent Expert concludes that Iceland managed the crisis better than many other countries and responded overwhelmingly in compliance with its international obligations. Mr. Bohoslavsky identifies, however, certain gaps that should be addressed. He recommends to further strengthen the legal and institutional framework to prevent repetition of a similar crisis and to pay attention to certain vulnerable groups, in particular highly indebted individuals; tenants living in rented homes; immigrants; and children living in single parent households. The report identifies several good practices on how States facing a financial crisis can prevent negative human rights impacts in the context of economic adjustment programmes. Mr. Bohoslavsky concludes that international organisations and other countries can learn from the particular path chosen in Iceland which included protecting its core social welfare system, efforts to ensure citizens participation in the decision making process, and endeavours to establish political, administrative and judicial accountability.

The country visit report (A/HRC/28/Add.1) will be made available at the website of the Independent Expert  only shortly before it will be discussed at the Human Rights Council on 9 March 2015. His end of mission statement with his preliminary findings is available here.

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.