Professor Eric Toussaint, an expert on debt auditing and on the cancellation of debt, talks about the present situation in Europe, why Greek debt cancellation is a legal necessity and why this would not be anything new. The founder of CADTM – The Committee for the Abolition of the Third World Debt – and coauthor of the book AAA: Audit, annulation, autre politique |1| offers a clear analysis of how the neoliberal architecture of the EU shackles the States into neoliberal austerity, which further enriches the powerful few while the majority of the people is pauperized.
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 are legal frameworks and arguments do you base you 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 |2|. 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 on 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 healthcare, 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 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.