THIS WEEK’S EVENTS in Greece gave us a glimpse of a humanitarian crisis that the Greek people have faced for some time now – brought on by years of devastating cuts, austerity and unemployment imposed by unaccountable lenders.
But without a doubt, the protracted, “wild west” nature of the negotiations we have witnessed over the past fortnight has worsened the situation for everybody. Dependent on its lenders’ good will – and without an independent arbiter to facilitate negotiations – Greece has remained at the mercy of the IMF and Europe, who can as they please dictate terms, reject suggestions, and renege on commitments, right down to the wire. The lack of agreed rules on how such debt negotiations should be managed has given those with a stake in seeing the Greek people humiliated free rein to do exactly as they please – with no laws to reign them in.
Repeated calls for a transparent, independent alternative
At its heart, the crisis in Greece is a crisis of debt – and the situation Greece finds itself in is neither new nor unpredictable for an indebted nation. Across Africa, Latin America and Asia, governments were forced to cut public spending, privatise services and lower taxes on the wealthy, in return for badly needed cash loans in the form of IMF “Structural Adjustment Programmes”. Most countries were within a few years forced back to the lender again, unable to make interest repayments because their economy had been so depressed.
As a result, for decades, heavily indebted countries have been calling for a transparent, independent mechanism to which any country can turn when it faces the possibility of not being able to repay its debts – much as a distressed mortgage holder negotiates a sustainable payment plan with a bank within an agreed legal framework.
The Argentinean example
Faced with its own spiralling debt crisis – precipitated not by greed or overspending, but by hungry ‘vulture funds’ keen to make profit by gambling on the fate of Argentinean economy – Argentina last September brought forward a proposal to the United Nations to establish such an international mechanism. It proposed that the United Nations was the most suitable independent arbiter between lenders and debtors, and that rules should be agreed to guide how sovereign debt crises would be resolved in an independent and transparent manner.
The Argentinean proposal was passed overwhelmingly at the United Nations, with the support of 124 countries. Ireland was one of only 11 countries to vote against the proposal. Since then, our government have boycotted every United Nations meeting held on the issue.
When questioned about their rationale for failing to support a UN debt resolution mechanism, the Irish government refer to the common EU position, which says the EU prioritises “… the IMF, as the primary forum to discuss sovereign debt restructuring” and as a result does not support the United Nations taking on that responsibility.
Forcing Greece back into the hands of the IMF
Looking back on how negotiations with Greece unfolded over the past fortnight, it is bizarre and nonsensical to suggest that the IMF could possibly have the capacity to act as a fair and independent arbiter of debt crises. It has its own interests, its own money at stake, and its own cards in the game. Suggesting sovereign debt crises be arbitrated by the IMF is like giving AIB free reign to decide how personal mortgage arrears should be handled – who with any sense would trust that as a fair arrangement?
In Greece, it is not day-to-day expenditure but the massive interest on its loans that is putting the economy in such perilous risk. Had an extension of the agreement with the Troika been reached last week, a massive €1.6 billion of any new money would have gone directly to repaying interest on its IMF loans. Without proper debt relief, further loans to Greece will serve not to rebuild the Greek economy, but to sustain repayments to Greek lenders, and create new interest – new profits – on new loans, including from the IMF.
The Irish government needs to do the right thing
In the macabre negotiations that have taken place between Greece and its creditors, what has been clear from the beginning is that it is politics – and not economic realities – that have driven the positions of the Troika members. For the IMF, this has meant preserving its right to dictate economic policy to any government in receipt of a loan, and to continue the cycle of loan – conditions, depression, risk of default, new loan – which keeps the lender in business.
The Irish government should do the right thing and step in to support negotiations for an independent United Nations debt resolution mechanism – its not too late to change its tune.
Eilis Ryan is the acting co-ordinator of the Debt and Development Coalition, Ireland. DDCI campaigns for debt justice in Ireland, Europe and the Global South and is currently running a petition on Greek debt which you can find here: http://www.debtireland.org/campaigns/drop-greek-debt.html
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