Why we are taking action for Greece, and other questions

June 2015

The bailouts which Greece was given have not benefited the people of Greece one bit. They have flowed into the European banks that recklessly lent the country money. Meanwhile, the financial speculators who created Greece’s woes are actually making large profits by gambling on this ongoing crisis.

We have joined a coalition of organisations in taking action against Greek debt and an end to the enforcing of austerity policies that are causing injustice and poverty in Europe and across the world.

Why are we taking this action on Greece?

Greece has undergone six years of severe austerity, creating the worst depression in modern Europe. Poverty has grown enormously, with over 60% of young people unemployed and a huge increase in rates of crime, suicide, HIV infection, homelessness and people relying on charity for food. What’s more, we believe this crisis has been used by international institutions to impose ‘free market’ policies on Greece – large scale privatisation, liberalisation of the labour market, destruction of the welfare state and pension system.

We have seen this before – with disastrous consequences. In the 1970s reckless bank lending led to huge debts on the part of Latin American, the African and Asian countries. These debts were enforced, though they were unpayable and illegitimate, through severe public spending cuts, privatisation and liberalisation. This ‘third world debt crisis’ led to the decimation of fledgling welfare states, of agricultural sectors and of industries. There was an massive cost to millions of lives and livelihoods, and attempts to establish more democratic societies was set back by years or decades.

In the global economy, ordinary people, particularly the poorest, are forced to pay the price of unregulated finance which places profit above human rights and the environment. We therefore need to defend those experiencing such injustice, both because we hope political support can alleviate their suffering, but also because through such support we can adopt policies which will build a world where wealth and power lies in the hands of the many rather than the few.

On the other hand, the policies of privatisation and liberalisation being pushed by European institutions and the International Monetary Fund will make our society more unfair and less democratic. These policies must be stopped.

>>> Take action here

Why now?

Greece is at the centre of the European crisis, but also provides the greatest potential for pursuing an alternative set of policies. Over the next few months decisions are being made which will either force Greece to adopt deeper austerity and make the situation worse for Greece’s people, or which will allow the new government to implement its proposals and Greece to start recovering from this manmade catastrophe. The European elite and IMF are trying to humiliate and defeat Greece’s government, because its policies would force the wealthiest in society, in particular the banks responsible for the crisis, to foot the bill for the crisis gripping Europe.

So this is an epic battle about Europe’s economic policies – and whether we should instead pursue policies that put people first or that put profit first.   

Didn’t Greece cause its own problems?

Greece’s economy had structural problems which fed into its debt crisis – low rates of tax collection and corruption as examples. But Western European governments and banks benefited from and exacerbated these problems – for instance encouraging Greece’s government to buy weapons with loans, even though Greece already spent very large amounts of money on the military. Even once the extent of Greece’s crisis became obvious, weapons sales contracts were being enforced by the German and French governments.

What’s more, Greece’s crisis was primarily brought to a head by the global financial crisis, fuelled by reckless lending and banking practices. Corruption and secrecy was facilitated by big business. Just look at the way investment giant Goldman Sachs helped Greek governments hide their true debts from their own people.

Since the ‘bailout’, Greece’s policies have been imposed by European institutions and the International Monetary Fund. These policies have increased Greece’s debt burden, and for the poorest in Greece have been a catastrophe.

When the bailouts began in 2010, €310 billion had been lent to the Greek government by reckless banks and the wider European financial sector. Since then, the ‘Troika’ of the IMF, EU and European Central Bank have lent €252 billion to the Greek government. Of this, €34.5 billion of the bailout money was used to pay for various ‘sweeteners’ to get the private sector to accept the 2012 debt restructuring. €48.2 billion was used to bailout Greek banks following the restructuring. €149.2 billion has been spent on paying the original debts and interest from reckless lenders. This means less than 10% of the money has reached the people of Greece. Today the Greek government debt is still €317 billion.

Jubilee Debt Campaign points out:

This was also known within the institutions conducting the bailout. Leaked minutes of the IMF Board meeting in 2010 which decided on the bailout showed that many countries were opposed and thought debts should be cancelled instead. Most strikingly, drawing on their own experience of failed bailouts in the late 1990s and early 2000s, Argentina argued that a “debt restructuring should have been on the table”. Brazil said the IMF loans:

“may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions”.

…The bailout and austerity programme did not take place because it was thought it would help the Greek people or reduce the size of the debt. It was done to save European and Greek banks and protect the profit of speculators.

Find out more about the reasons for cancelling Greece’s debt

No-one cancels my debt – why should we cancel Greece’s?

Actually debt has regularly been cancelled throughout history – including Britain’s First World War debt to the US. After the Second World War, Germany had massive amounts of debt written off, which was more important than the Marshall Plan spending in terms of Germany’s recovery. More recently, both Argentina and Iceland have refused to pay portions of their debt. They experienced much faster recovery, and were able to protect their people better than societies which continued to impose austerity and liberalisation simply to repay banks.

In some of these situations, there was also a cancellation of personal debt – including housing debt.

When it comes down to it, a supposed morality around ‘paying debt’ must not come above fulfilling human rights or protecting the poorest. Even if all of Greece’s debt was entirely given in good faith and legitimate, which is far from the truth, it cannot be right that repayment of banks and international institutions comes above providing healthcare and education.   

What does Syriza want to do?

Syriza has a broad manifesto, but far from being ‘extremist’ many of its economic proposals are moderate and sensible. Of particular relevance, Syriza proposes a debt conference be held in Europe to find an equitable way of dealing with the debt. This would help redress the power imbalance in the current system wherein debt cancellation and rescheduling, when it happens, is a ‘gift’ of the major creditors and come ‘on their terms’, rather than debt being seen as a collective responsibility of lender and borrower.

Greece has now set up a debt audit to expose where its debt really came from, with a view to deciding what should be paid and what shouldn’t, and to exposing the corruption behind the debt. With this information, Greece hopes to cancel debts that cannot be paid, and to propose a fairer debt system which means the responsibility for debts are not all laid at the door of the borrower.

So Syriza proposes debt cancellation, this does not go further than other countries have done in the past, notably the policies which were carried out by Germany after the Second World War, which involved deep debt cancellation, and remaining debt payments being strictly limited as a proportion of growth and export revenue. More on this topic can be found here.

Finally, Syriza proposes a series of policies aimed at alleviating suffering, helping the economy recover and preventing the sell-off of all government assets, for instance, employment schemes, halting privatisation, reforming the tax structure, legalising the children of migrants.

Syriza has many other policies, but those already mentioned have caused an astonishing reaction among European leaders. Indeed, the government has already compromised on many of these policies, but is still being met by a refusal to properly negotiate by EU institutions.

What does all this mean for poverty and inequality outside Europe?

Europe is at a crossroads. Do we continue to head down an anti-democratic route where ever more of our society is sold off, inequality continues to spiral, and poverty and unemployment are seen as personal failings? Or can we prove that there are alternative policies to those of debt and austerity?

By supporting a new, rational form of economic policy in Greece, we can start building a society where we remember the importance of collective action, equality and human rights, and strive for new forms of democracy. Greece’s government backed by social movements are trying to prove that there is an alternative to the rule of the banks and the running of society as if it were a market.

On the other hand, if Greece fails, the rule of corporate interests will be strengthened, having successfully wiped out an alternative. It has been commented that the failure of the current government to halt austerity policies would be ‘one more event for Greece, but a tragedy for Europe’.  

How does this affect the global South?

The ‘bailout’ programmes starting in 2010 repeated mistakes made in Latin American, African and Asian countries in the 1980s and 1990s. Bailing out European banks rather than making them cancel debts would ensure the private speculators would get repaid, while the public would pay the cost of having to cancel debts in the future.

Today, some countries of the global south are in debt again, and groups like Jubilee Debt Campaign predict another debt crisis in some African countries in the near future. Before this happens, we need to restructure the global economy so countries are not trapped in a debt-austerity model.

The poverty created by this system in the last 30 years is enormous. The African and Latin American debt crises of the 1980s and 1990s were followed by the East Asian Financial Crisis of 1996-1998, Russian default in 1998 and Argentina default in 2001.

Unless countries stand up against this system, nothing will change. The lenders are too powerful and too self-interested to make the changes necessary. So although Greece is in Europe, the outcome of its battle with the European institutions might well be one of the few things that can force a structural change in the international system.

Major changes are necessary to the global financial system to prevent suffering in the future. Democratic control of banks, major tax reforms, agreements to ensure more balance in the global economy, trade rules that redistribute from rich to poor not vice versa. These are big and long term changes, but not impossible. Recognising the injustice which has been done to Greece, and helping the Greek people stand up against this injustice would be a step in the right direction.

>>> Take action and stand with the Greek people

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