Why pay off our public debt?
by Eric Toussaint
“Here in Europe, the European Central Bank is not allowed to lend money to member States, so the monopoly for lending money to the public powers in the Euro zone is left in the hands of the private bankers who take full advantage of this in order to set the kind of interest rates that benefit them the most. In other words, they currently lend money to the BCE at 0.25% and then proceed to lend Italy money at 4%. When things are going badly for Italy, they lend us money at 6-7%. The citizens have to take the initiative when it comes to conducting a “debt audit”, asking the right questions and coming up with the answers themselves, without being too concerned about the fact that there is a major economics and finance expert.” Éric Toussaint
This interview of Eric Toussaint was done in Brussels March 7, 2014 by members of the 5 stars political movement, created in Italy by Beppe Grillo. (Video in French)
Good day, my name is Éric Toussaint and I chair the Comité pour l’Annulation de la Dette du Tiers Monde (“Committee for the Abolition of Third World debt”, Ed), an international network operating in Latin America, Africa, Asia and Europe. This organisation has been going for the past twenty-five years and deals with the issue of debt from Argentina to Haiti and from Ecuador to the African Countries. Then, with the crisis that exploded in Europe in 2007 and 2008 and became even more deep rooted with what happened in Greece beginning with the so-called “Troika memorandum” by which the Central European Bank, the European Commission and the International Monetary Fund imposed some very harsh austerity programmes on Greece first, and then on other countries, we were able to see that the problem of debt also exists here in Europe. A country like Italy has a public debt equivalent to 130% of Gross Domestic Product and the media, as well as successive Italian governments, beginning with Mario Monti and now also the new government, regularly talk about this major effort that has to be made to reduce our public debt and therefore apply austerity measures.
One thing that the political leaders and the media want to avoid at all costs is any discussion regarding where this debt originated in the first place, how it is made up, whether it is normal to repay this debt or whether we should be asking ourselves the following question: was this debt made for good reasons, in the public interest, to improve their way of life, to improve the Country’s infrastructure …. was it made for reasons of public interest and social justice or was it all made in the interests of private individuals, or perhaps those of the bankers themselves who lend money to the State, or political parties or leaders who want to see some major infrastructure projects like motorway or airport projects that cost huge amounts of money and therefore have to be financed by means of public debt? Then, is this debt paid back at normal terms, in other words at reasonable rates of interest or are the creditors, particularly the bankers, abusing their situation?
As we know, here in Europe, the European Central Bank is not allowed to lend money to member States, so the monopoly for lending money to the public powers in the Euro zone is left in the hands of the private bankers who take full advantage of this in order to set the kind of interest rates that benefit them the most. In other words, they currently lend money to the BCE at 0.25% and then proceed to lend Italy money at 4%. When things are going badly for Italy, they lend us money at 6-7%: in other words, extremely high interest rates.
In this regard, the citizens have to take the initiative when it comes to “auditing the debt”, ask the right questions and come up with the answers themselves, without being too concerned about the fact that there is a major economics and national finance expert. You can ask the right questions and find people with the right kind of technical knowledge. This basic democratic exercise, namely the public audit, is not simply meant to educate and create awareness, but should also assist in terms of future policy choices.
If we feel that at least part of the Country’s accumulated public debt is illegitimate, then we need to work out how to refuse to pay it back. If this debt does not comply with the criteria for legitimacy and legality then we must be able to say “we won’t pay it back”. In that case, we have to mobilise in order to say that we don’t agree with the government continuing to apply a policy of austerity in order to repay a debt that unjustified.
This could even apply to a specific town. In Brescia, Milan and various other centres, we know that loans were taken out with a number of banks at very high interest rates and that certain projects were undertaken involving expenses that were not necessarily in the interests of the municipal residents. Therefore, here too we should do an audit. We are talking not only in terms of national audits of all Countries, for example the national debt of Italy, Greece, Germany, France …, but also local audits of various municipalities or regions (there is also such a thing as regional debt).
I am personally very involved in this kind of thing. I participated in debt audits in Ecuador in 2007-2008: in 14 months, eighteen members of an audit committee established by the Ecuadorian Government analysed and commented on all the Country’s debt, including internal debt, external debt, bank debt, multilateral institution debt and debt with the International Monetary Fund, the World Bank, etc, bilateral debt, in other words Equator’s debt towards other Countries, like Italy for example. Ecuador is in debt to Italy for the construction of a hydroelectric power station on one of its lakes, which was a real disaster for the local population. However, Italy wants to be paid back for this illegitimate debt in full view of the Ecuadorians even though Italy granted the loan to Ecuador so that that Country would get several Italian companies to build the dam. The Italian companies, however, absolutely did not comply with what is called the “tender specifications”, in other words with what they were supposed to do or even the type of dam they were supposed to build and they failed to respect the rights of the local population, etc. So we analysed the “DOL Project” in southern Ecuador and we then inter-alia re-opened discussion of the bilateral debt to Italy.
Having gained this experience in Ecuador, I am trying to make that experience available to various Countries, wherever there are people who truly want to fight alongside my organisation. Our means are limited and what we say to the citizens, above all else, is that they must take thing upon themselves. We can assist by producing certain documents, a citizen’s manual if you will. We have just compiled a new one that is due to be published in English and French and probably also Portuguese and Spanish and will help citizens to grasp some techniques and other people’s experience on how to conduct a public audit.
Spread the word!