Preliminary Report by the Truth Committee on Public Debt

Preliminary report The Truth Committee on Public Debt (Debt Truth Committee) was established on April 4, 2015, by a decision of the President of the Hellenic Parliament, Ms Zoe Konstantopoulou, who confided the Scientific Coordination of its work to Dr. Eric Toussaint and the cooperation of the Committee with the European Parliament and other Parliaments and international organizations to MEP Ms Sofia Sakorafa. Members of the Committee have convened in public and closed sessions, to produce this preliminary report, under the supervision of the scientific coordinator and with the cooperation and input of other members of the Committee, as well as experts and contributors. The preliminary report chapters were coordinated by: Bantekas Ilias Contargyris Thanos Fattorelli Maria Lucia Husson Michel Laskaridis Christina Marchetos Spyros Onaran Ozlem Tombazos Stavros Vatikiotis Leonidas Vivien Renaud With contributions from: Aktypis Héraclès Albarracin Daniel Bonfond Olivier Borja Diego Cutillas Sergi Gonçalves Alves Raphaël Goutziomitros Fotis Kasimatis Giorgos Kazakos Aris Lumina Cephas Mitralias Sonia Saurin Patrick Sklias Pantelis Spanou Despoina Stromblos Nikos Tzitzikou Sofia The authors are grateful for the advice and input received from other members of the Truth Committee on Public Debt as well as other experts, who contributed to the Committee’s work during the public sessions and hearings and the closed or informal consultations. The authors are grateful for the valuable assistance of Arnaoutis Petros Konstantinos, Aronis Charalambos, Bama Claudia, Karageorgiou Louiza, Makrygianni Antigoni and Papaioannou Stavros 2 Executive Summary n June 2015 Greece stands at a crossroads of improve its capacity to pay the debt back. The facts choosing between furthering the failed macroe- presented in this report challenge this argument. conomic adjustment programmemes imposed by All the evidence we present in this report shows the creditors or making a real change to break that Greece not only does not have the ability to pay Ithe chains of debt. Five years since the economic ad- this debt, but also should not pay this debt first and justment programmemes began, the country remains foremost because the debt emerging from the Troi- deeply cemented in an economic, social, democratic ka’s arrangements is a direct infringement on the fun- and ecological crisis. The black box of debt has re- damental human rights of the residents of Greece. mained closed, and until a few months ago no author- Hence, we came to the conclusion that Greece should ity, Greek or international, had sought to bring to light not pay this debt because it is illegal, illegitimate, and the truth about how and why Greece was subjected odious. to the Troika regime. The debt, in the name of which It has also come to the understanding of the Com- nothing has been spared, remains the rule through mittee that the unsustainability of the Greek public which neoliberal adjustment is imposed, and the debt was evident from the outset to the international deepest and longest recession experienced in Europe creditors, the Greek authorities, and the corporate during peacetime. media. Yet, the Greek authorities, together with some There is an immediate democratic need and social other governments in the EU, conspired against the responsibility to address a range of legal, social and restructuring of public debt in 2010 in order to pro- economic issues that demand proper consideration. tect financial institutions. The corporate media hid In response, the President of the Hellenic Parliament the truth from the public by depicting a situation in established the Truth Committee on Public Debt which the bailout was argued to benefit Greece, whilst (Debt Truth Committee) in April 2015, mandating the spinning a narrative intended to portray the popula- investigation into the creation and the increase of tion as deservers of their own wrongdoings. public debt, the way and reasons for which debt was Bailout funds provided in both programmemes of contracted, and the impact that the conditionalities 2010 and 2012 have been externally managed through attached to the loans have had on the economy and complicated schemes, preventing any fiscal autono- the population. The Truth Committee has a mandate my. The use of the bailout money is strictly dictated to raise awareness of issues pertaining to the Greek by the creditors, and so, it is revealing that less than debt, both domestically and internationally, and to 10% of these funds have been destined to the gov- formulate arguments and options concerning the ernment’s current expenditure. cancellation of the debt. This preliminary report presents a primary map- The research of the Committee presented in this ping out of the key problems and issues associated preliminary report sheds light on the fact that the with the public debt, and notes key legal violations entire adjustment programmeme, to which Greece associated with the contracting of the debt; it also has been subjugated, was and remains a politically traces out the legal foundations, on which unilateral orientated programmeme. The technical exercise suspension of the debt payments can be based. The surrounding macroeconomic variables and debt pro- findings are presented in nine chapters structured as jections, figures directly relating to people’s lives and follows: livelihoods, has enabled discussions around the debt to remain at a technical level mainly revolving around Chapter 1, Debt before the Troika, analyses the argument that the policies imposed on Greece will the growth of the Greek public debt since the 1980s. It 3 concludes that the increase in debt was not due to ex- grammes” have directly affected living conditions of cessive public spending, which in fact remained lower the people and violated human rights, which Greece than the public spending of other Eurozone countries, and its partners are obliged to respect, protect and but rather due to the payment of extremely high rates promote under domestic, regional and international of interest to creditors, excessive and unjustified mili- law. The drastic adjustments, imposed on the Greek tary spending, loss of tax revenues due to illicit capital economy and society as a whole, have brought about outflows, state recapitalization of private banks, and a rapid deterioration of living standards, and remain the international imbalances created via the flaws incompatible with social justice, social cohesion, de- in the design of the Monetary Union itself. Adopting mocracy and human rights. the euro led to a drastic increase of private debt in Greece to which major European private banks as well Chapter 7, Legal issues surrounding the as the Greek banks were exposed. A growing banking MOU and Loan Agreements, argues there has been crisis contributed to the Greek sovereign debt crisis. a breach of human rights obligations on the part of George Papandreou’s government helped to present Greece itself and the lenders, that is the Euro Area the elements of a banking crisis as a sovereign debt (Lender) Member States, the European Commission, crisis in 2009 by emphasizing and boosting the public the European Central Bank, and the International deficit and debt. Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human Chapter 2, Evolution of Greek public debt rights violations as an outcome of the policies they during 2010-2015, concludes that the first loan obliged Greece to pursue, and also directly violated agreement of 2010, aimed primarily to rescue the the Greek constitution by effectively stripping Greece Greek and other European private banks, and to allow of most of its sovereign rights. The agreements con- the banks to reduce their exposure to Greek govern- tain abusive clauses, effectively coercing Greece to ment bonds. surrender significant aspects of its sovereignty. This Chapter 3, Greek public debt by creditor is imprinted in the choice of the English law as gov- in 2015, presents the contentious nature of Greece’s erning law for those agreements, which facilitated current debt, delineating the loans’ key characteris- the circumvention of the Greek Constitution and in- tics, which are further analysed in Chapter 8. ternational human rights obligations. Conflicts with human rights and customary obligations, several in- Chapter 4, Debt System Mechanism in dications of contracting parties acting in bad faith, Greece reveals the mechanisms devised by the agree- which together with the unconscionable character of ments that were implemented since May 2010. They the agreements, render these agreements invalid. created a substantial amount of new debt to bilateral creditors and the European Financial Stability Fund Chapter 8, Assessment of the Debts as (EFSF), whilst generating abusive costs thus deepen- regards illegtimacy, odiousness, illegality, and un- ing the crisis further. The mechanisms disclose how sustainability, provides an assessment of the Greek the majority of borrowed funds were transferred di- public debt according to the definitions regarding rectly to financial institutions. Rather than benefitting illegitimate, odious, illegal, and unsustainable debt Greece, they have accelerated the privatization pro- adopted by the Committee. cess, through the use of financial instruments. Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is cur- Chapter 5, Conditionalities against sustain- rently unable to service its debt without seriously

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