April 2011 - Centre for Civil Society - University of KwaZulu-Natal

convinced that Greece’s debts are not sustainable and the country will
have to default on those debts in coming months or years.
Meanwhile, €36 billion (11% of GDP) of spending cuts are underway, with
rumours of a firesale of Greek assets – from islands to ruins - not to
mention numerous structural reforms which will weaken the power of
unions. Both cuts and reforms will see inequality soar in Greece in the next
10 years.
This treatment is justified, in the eyes of Western Europe, on the basis
that Greece is said to be a country of high benefits and little work. But
actually Greece’s problems are structural – and mirror the problems of
finance more generally.
Greece, like other peripheral European countries such as Ireland and
Portugal, is unable to compete with its richer neighbours. Its integration
into the Euro means it has no control over interest rates or exchange rates.
To keep going – just like people across the US and Western Europe who are
trying to get by in societies experiencing sharply rising inequality – the
economy borrows. In borrowing, it makes Western European banks and
investors a lot of money. French, German and British banks have lent the
Greek public and private sectors €80 billion; one-third of Greece’s national
income.
When the good times dry up and the banks find that they’ve lent a lot of
money that can’t be repaid, the EU and IMF step in with new loans to
ensure the banks do get repaid via a ‘bail-out’ package to the distressed
country. Heaven forbid the banks or other lenders should take the pain.
Sharp austerity packages mean the poorest shoulder the burden of their
economy’s ‘adjustment’.
Indeed that’s exactly what Bank of England Governor Mervyn King said
about the UK economy earlier this week: “The price of this financial crisis
is being borne by people who absolutely did not cause it. Now is the period
when the cost is being paid, I'm surprised that the degree of public anger
has not been greater than it has." In Greece, the case is even stronger –
and people are even more angry.
That’s why a broad range of civil society actors has now called for this
debt to be looked into – so ordinary people have an opportunity to properly
understand where the debt came from. The call, signed by Noam Chomsky,
Tony Benn, Ken Loach and many economists, politicians and academics
says “the Greek people have been kept in the dark regarding the
composition and terms of public debt. The lack of information represents a
fundamental failure of the democratic process. The people who are called
upon to bear the costs of EU programmes have a democratic right to
receive full information on public debt.”
Such an audit would throw up some interesting questions regarding the
legality (banks may have been lending in contravention of public debt
rules), legitimacy (debts may have been hidden off-balance-sheet) and
morality (those least responsible are now paying the highest price for that
lending) of European debts.
The idea of a Debt Audit is inspired by movements in highly indebted
developing countries. In 2007, President Correa of Ecuador established a
Debt Audit Commission claiming his most important debt was to the people
of Ecuador. In 2008, the Commission reported that Ecuador’s debts had
caused “incalculable damage” to the people and environment of that
country.