When the debt is illegitimate
[font size=3]Eric Toussaint, the spokesperson for the Committee to Abolish Third World Debt (CADTM), has been named by the Greek parliament, led by the Coalition of the Radical Left, or SYRIZA, to head a commission to audit the country's overwhelming foreign debt, which has reached as high as 175 percent of Greece's annual gross domestic product. In an interview published on the CADTM website before the commission was announced, Toussaint talked to Kristina Bozic of the Slovenian weekly Dnevnik about the present situation in Europe, why debt cancellation is an absolute necessity in Greece, and why this wouldn't be the first such action.[/font]
Most of the arguments against debt restructuring and cancellation are based on the conviction that agreements and laws have to be respected. You claim that debts can be illegitimate and their cancellation necessary to ensure the rule of law and respect of constitutions. What legal frameworks and arguments do you base your arguments on?
The first lesson of history should be that debts have often been written off. The major debt cancellation in the 20th century was the London agreement about the German debt in 1953, when 62 percent of the German debt was written off. The creditors furthermore agreed to give up their demands for German reparations for the occupation and destruction of the Nazi regime during the Second World War. This was a very important debt write-off agreed to by the creditors. Later, the Polish debt was written off when Poland decided to leave the Warsaw Pact under the presidency of Lech Walesa. In 2004, creditors canceled 80 percent of the Iraqi debt. There are numerous examples of debt cancellation.
The legal basis for the debtor country to decide as a sovereign state not to pay back the debt is its constitution or the fact that there are priority obligations a state has to meet. These are mostly connected to its duty to guarantee the human rights of its population. This obligation has priority over any obligation to repay a debt, and therefore, if repaying debts impedes the possibility for the government to guarantee public health care, public education, peace and security for its population, the said government can decide not to repay the debt.
Moreover, if the debt claimed by creditors is an illegal debt, then the contract of indebtedness is null and void. In this case, it is possible for the sovereign state to tell its creditors that what they are demanding to be paid back is, in fact, illegal. In the case of the eurozone, we can claim that at least parts of the loans given by the Troika of the European Central Bank, the European Commission and the International Monetary Fund (IMF) in 2010 to Greece and Ireland, in 2011 to Portugal and in 2013 to Cyprus are illegal. In the case of Greece, I would claim that the loans are illegal in their entirety.
Read more: http://socialistworker.org/2015/03/23/when-the-debt-is-illegitimate