(This is the last of three posts about the new female head of the IMF, which the business press is promoting as a “rock star of the economic world,” and how we are being deceived about the real cause of the debt crisis in Europe.)
The free Greek documentary Debtocracy effectively dispels the media myths about lazy Greek workers and and scofflaw Greek taxpayers being responsible for the Greek debt crisis. It begins with an overview of what its filmmakers feel has been a basic goal of both globalization and the creation of a single European currency – namely “labor discipline” and the suppression of wages in heavily unionized countries. They show how sweeping deregulation in the industrialized world in the 1980s allowed manufacturers to eliminate unions by shutting plants down and reopening them as sweatshops in the third world. The subsequent creation of the Euro as a single currency allowed the central European countries (Germany and France) to use the mechanism of debt to weaken strong unions in peripheral Eurozone countries, especially Greece. Germany, with relatively weak unions following reunification, imposed a virtual ten year wage freeze. While German workers suffered, German companies and banks racked up immense profits and stacks of cash, which they loaned to “peripheral” countries to finance big corporate tax cuts.
The bulk of the film focuses on the concept of “odious” debt and whether the Greek people should be forced to suffer for fraudulent loans from which they received no direct benefit. As Debtocracy poignantly depicts, Athens and other Greek cities are experiencing a third world humanitarian crisis, with massive homelessness, hunger and untreated illness. The film quotes a recent IMF report predicting a 5-10% decrease in Greek life expectancy due to the debt crisis and austerity cuts
Odious Debt: An American Invention
Odious debt was a concept invented by the US in the early 20th century to avoid repaying Spain’s war debt after the US took possession of Cuba following the Spanish-American War. It was used again by George Bush following the US occupation of Iraq, to avoid repayment of Sadam Hussein’s debts to China, France, Germany and Russia. Since then approximately a dozen countries – most notably Argentina, Ecuador and Iceland – have repudiated so-called “illegitimate” debt incurred by deposed leaders.
The film focuses mainly Argentina’s and Ecuador’s default on their foreign debt. In 2001 the structural adjustments the IMF forced on Argentina bankrupted the country. A popular uprising forced the Argentine president to flee (in a helicopter), and the new government declared the IMF debt illegal and unconstitutional. When Ecuador experienced a similar economic crisis and uprising in 2007, they, too, sent their president packing (again in a helicopter). In 2008, their new president Rafael Correa appointed a Debt Audit Commission to study the strong arm tactics (some of which John Perkins describes in Confessions of an Economic Hit Man) that led former Ecuadorian leaders to borrow billions of dollars to purchase US-built infrastructure that only benefited Ecuador’s wealthy elite. Correa’s Debt Audit Commission ascertained that only 30% of their external debt was legitimately incurred.
CADTM’s Call for a Greek Debt Audit Commission
Iric Toussaint, a French economist who participated in the Ecuadorian Debt Audit Commission, believes a major proportion of Greek debt may have been fraudulently incurred. The following evidence supports this view:
- Nearly one billion euros of debt resulted from a risky swap (of yen and dollars for euros) Goldman Sachs persuaded Greece to make in 2001. The transaction netted Goldman Sachs $600 million in profit (see Secret Greek loan).
- Major German and French loans were issued on condition that the Greek government incur further indebtedness to purchase hundreds of millions of euros of German and French armaments.
- Billions of dollars of Green debt resulted from major cost overruns on the 2004 Greek Olympics (which cost twice as much as the Sydney Olympics in 2000). These have never been explained nor investigated.
- In 2010 a former Goldman Sachs official was hired to manage the Greek public debt authority, with the result that the entire 2010 rescue package (103 million euros) was used to bail out Greek banks.
The film also discusses the March 2011 call by the Committee for the Abolition of Third World Debt (CADTM) to create an audit commission to examine Greek public debt. It ends with the ominous sound of a helicopter, eerily foreshadowing the forced resignation of Greek prime minister George Papandreou last November, when CNN advised him to get a helicopter to save himself from angry protestors (see Fall of Papandreou).
Exchange rate: 1 Euro equals $US1.33.
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