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Breaking with creditors’ power: the importance of the Greek debt audit

While the world's media focuses on the bailout negotiations, a debt audit is underway to prove much of Greece's debt illegitimate, illegal and odious, writes Fanny Malinen

June 23, 2015
5 min read

The world’s eyes are once more on Greece. I had the opportunity to visit Athens in mid-May, joining a knowledge exchange organised by the Political Economy Research Centre at Goldsmiths, University of London. The Greek government had just days before paid their international creditors with money from pension funds and other public organisations. There seemed little reason for optimism that the government would not give in to the pressure and accept the austerity that would come with the next debt payments.

I was told the city was far less militarised than during the previous government, even though there is still a riot police bus near every square. I could feel a whiff of expectations in the air of the city. People seemed to like the governing party Syriza mostly because they were not the previous government. Yet the government was not at that point standing strong against the creditors that own 80 per cent of Greece’s debt: the European Commission, European Central Bank and IMF. What has changed in the last few weeks?

Can’t pay or shouldn’t pay?

Of course, there are many factors. It has long been clear to economists – and most people who are not high-ranking EU officials – that it is impossible for Greece to pay its debts in full. But ‘can’t pay’ is different from ‘shouldn’t pay’. The argument is gaining traction that the loans to Greece never benefited the people and should therefore be written off.

In April the speaker of the Hellenic Parliament, Zoe Konstantopoulou, launched a Truth Committee on Public Debt. The committee consists partly of international experts, many of whom also participated in the similar process that led to Ecuador defaulting on billions of dollars’ worth of loans to international creditors in 2008. Many of the Greek participants are not affiliated with Syriza. Giorgios Mitralis, a member of CADTM (Committee for the Abolition of Third World Debt) Greece, told us that, surprisingly many are officials who had worked for the previous government. There are also grassroots activists who have been campaigning for a citizens’ debt audit since 2011 – a reminder that Greece’s rejection of austerity has grown out of years of hard work by social movements.

greekparliamentGreece’s parliament, where the committee’s findings were presented this week.

The Debt Truth Committee published its first findings this week. ‘Greece not only does not have the ability to pay this debt, but also should not pay this debt, first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece,’ it states. ‘Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.’

The European Central Bank over-stepped its mandate by imposing political conditions on its loans. Other EU countries’ bilateral loans did not benefit the Greek people but instead European financial institutions. The IMF knew that the conditions attached to their loans were undemocratic and in breach of human rights Greece is obliged to respect under domestic and international law. These are some examples of the illegal, illegitimate and odious nature of the Greek debt.

Reclaiming default

It is difficult to over-estimate the importance of the debt audit: as Syriza’s months in office have shown, it is impossible to reject austerity when a country’s sovereignty is compromised by the power of its creditors. Many countries in the global South have known this for decades.

Creditors go to great lengths of effort to keep debtor countries on their knees enough to adhere to neoliberal policies, but this is a careful balancing act not to push them into default. That could break them free from their submissive position. Because of the imbalance of power, it does not matter that the rules of financial capitalism that dictate the situation – although presented as some law of science – are totally arbitrary.

A debt audit exposes this power. It reclaims default from a creditor-imposed disaster into a legitimate option to deal with illegal or illegitimate loans. As we can see in Greece, it broadens the discussion from how to pay onto whether to pay. The findings of the Truth Committee are not binding: they are only ‘a very strong argument not to pay’, as Giorgos Mitralis, who initiated the international appeal in support of the committee, told us in Athens.

Greece is upfront that it cannot pay the debt. Pressure from the grassroots and international solidarity is still needed to ensure Greece rejects its creditors’ grip and says ‘we won’t pay’ – not because their debts are impossible, but because they are immoral.

Fanny Malinen is a London-based freelance journalist and member of Debt Resistance UK, which challenges debt injustice on a personal and political level. She went to Athens as part of a knowledge exchange organised by the Political Economy Research Centre, Goldsmiths, University of London, with support from the ESRC.

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