Global Policy Forum

Alternatives to the debt crisis

When_Greece_fallsAs the lion’s share of the world’s nations suffer from austerity policies, politicians, financial experts and civil society activists came together this month for a three-day international conference to discuss alternative ways of tackling the debt crisis. Themes included debt restructuring options for countries suffering from high debt burdens, the value of carrying out debt audits to help identify and repudiate illegitimate debt, the problems caused by the tight mandates of central banks, and options how to bring interest rates and eventually the costs of debt service down.

March 19, 2014 | Eurodad

What's the alternative?: Experts from across the world gather to discuss solutions to the debt crisis

The event – which took place in Brussels and was organised by Eurodad and the Rosa Luxemburg Stiftung (RLS) – included speakers from Europe, Asia, Latin and North America, the Middle East and North Africa. The conference began with a public forum in which the key themes were discussed and then explored over the following two days.

MEP Gabi Zimmer was the first to speak and opened the conference by questioning the legitimacy of the Troika as lead manager of the debt crisis in the EU, and telling the audience that everywhere in Europe a new policy is needed that questions how we manage the crisis and takes into account alternatives to austerity.

Other panellists went on to speak of the importance of new international as well as national solutions, with a general agreement that institutions such as the IMF, the EU and even the UN, had failed to find a solution to the crisis and that their policies had - in many cases - reinforced it.

Former Ecuadorian minister Alberto Acosta was one of the early speakers. He told the audience that Europe no longer has all of the answers when it comes to solving its debt crisis and described his country’s crippling debt problem in the 2000s and their route out. This involved an audit of the public debt, the discovery of illegitimate debt and finally a slash in repayments. Eurodad contributed to this process as an international advisor and analyst on bilateral debt issues as part of the Debt Audit Commission in Ecuador.

Mr Acosta said it is necessary to do an audit of external debt, and we need to understand that there are corrupted debts, some of which cannot be paid for important reasons. He told the audience not to be afraid of the non-payment of external debt, but added that it doesn’t solve long-term problems either.

Mr Acosta was one of several speakers to positively cite the debt workout of Germany in 1953, known as the London Debt Accord, which saw the nation’s payments cut by half, and extended over 30 years so that there was not a negative impact on growth. He and others questioned why this example is not being followed today and called for debt resolutions that promote rather than hinder development and social welfare.

The panel turned next to Tunisia and Mabrouka Mbarek, a member of the Constituent Assembly and advisor to the country’s president on debt and transparency. She criticised the EU’s intention to make a proposed loan to Tunisia conditional on compliance with a harsh IMF adjustment programme. She described how she is promoting a debt audit bill in Tunisia in order to identify the origins of the loan contracted by the autocratic regime of Ben Ali before the revolution, and where embezzled money ended up. She also flagged that other nations refuse to return assets that were stolen by the former oligarchy to Tunisia until there is better evidence that it was originally public money.

The situation of Greece was explored by Dr Yiannos Milios, a professor at the National Technical University of Athens. He also pointed to a London Debt Accord type conference and restructuring as one way out of the debt crises. But he flagged that huge debt burdens are not just a Greek problem. He went on to call for the politicisation of the Central Bank and all European institutions, so that the debt problem and social problems are no longer separated. He mentioned that there are technical solutions to unsustainable debt that involve no costs for taxpayers in creditor countries. For instance, if the ECB was to purchase a certain share cent of outstanding government debt and swap them into bonds which do not gather interest and can be repaid over long periods, taking the pressure off debt distressed countries.

German MP Axel Troost was the final speaker and gave a different take on the crisis. He called for an immediate end to austerity measures and neo-liberal restructuring of national economies. The volume of public debt, he argued, does not matter. It is the cost of paying and thus the interest rates that matter. Key is to bring interest rates down, for example through the introduction of Euro bonds.

He also spoke of plans for debt retirement or partial remission, but not for a full default as in the case of Argentina because it might boost the costs of future borrowing. Rather than a debt audit – which he argued could be subjective - Mr Troost emphasised that the EU needs to do more to raise public revenue, for example through the introduction of a financial transaction tax (FTT), a bank levy and of wealth taxes.

A comprehensive report of the conference and filmed interviews of some of the key speakers will be available on the Eurodad and RLS websites in coming weeks. 

Read the original article on Eurodad's website here.


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