Parliamentary Debt Truth Committee Member Özlem Onaran: Should Greece Pay Back Its Debt?

There are well-established concepts in international law that question the legality, legitimacy and sustainability of a loan agreement. These legal concepts are the guiding references for the Debt Truth Committee in addressing the following questions:

Is any part of Greek public debt before or after the Memoranda of Understanding (MoU) with the Troika illegitimate? Was it contracted by a government without considering whether the public or general interest would be safeguarded? Was any part of it contracted in violation of the current legal or constitutional system? Has any part of the debt been granted on conditions that violate the social, economic, cultural, civic, and political rights of the people concerned? Were the loans intended not to save Greece but French and German banks?

The creditor institutions as well as the debtor governments have an obligation to audit these aspects before any loan agreement is made. Did EU governments consider whether any of these loan agreements violated the EU Charter of Fundamental Rights?

The conditionalities of the loan agreements since 2010 have not only destabilized the economy and society, but they also made public debt even more unsustainable. Research by Gechert and Rannenberg of the Hans Böckler Foundation in Germany show that without austerity the Greek economy would only have stagnated rather than lose 25% of its GDP. Implementing tax increases alone and no spending cuts would have been much more effective in lowering the debt to GDP ratio. The Troika did not adequately take into account the higher than average multiplier effects of cuts during recessions when designing the Greek programme.

Contrary to the assumptions of the European Commission (EC) and the IMF, falling wages do not stimulate net exports significantly either.

Dealing with the depression and humanitarian crisis in Greece requires measures to reverse both inequality and austerity, increase the minimum wage, re-establish collective bargaining institutions and the welfare state, and promote public investment in the social and physical infrastructure via a healthy and progressive tax system. This is, unfortunately, not how the creditor institutions understand structural change.

However the EC, ECB, and the IMF are not guided by rational long-term economic and social concerns, but by erroneous economic concepts that serve the interests of the financial world. Therefore, the initiative of the Greek Parliament is of historical importance, not just for Greece but also for Europe as a whole.

Source: Social Europe Should Greece Pay Back Its Debt? by Özlem Onaran, 23/04 2015

Özlem Onaran is a member of the Debt Truth Committee in Greece and Professor of Workforce and Economic Development Policy at the University of Greenwich.

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