BRICS: Global Change, Peril And Promise.

by Jerry Alatalo

“But those who desire to be rich fall into temptation, into a snare, into many senseless and hurtful desires that plunge men into ruin and destruction. For the love of money is the root of all evils; it is through this craving that some have wandered away from the faith and pierced their hearts with many pangs.”

– 1 Timothy 5:9-10

ome have attributed today’s wars and violence around the Earth in large part to the rise of BRICS (Brazil, Russia, India, China, South Africa) international financial institutions. Listening to Brazil-born Paulo Nogueira Batista – an Executive Director for eight years at the International Monetary Fund (IMF) – provides affirmation the analysis is most likely correct. The question which arises is can humanity prevent the outbreak of a possible major war over this historic change.

Mr. Batista’s last day of employment at the IMF is June 30, after which he will take the position of Vice President of BRICS new, ready-to-open development bank, marking the first time the IMF, World Bank and other major US/western dominated international financial institutions will have “competition”. The development of BRICS will result in a reduction in the role of the dollar as the world’s major currency. Analysts have concluded that the reason the US, Britain and other western nations invaded Iraq and deposed Saddam Hussein in 2003 was Hussein’s decision to sell oil for euros, instead of the dollar. Analysts believe Muammar Gaddafi and Libya became destroyed by NATO air-bombardment in 2011 because of Gaddafi’s plan for major monetary reform – creation of gold Dinars as the new currency for the continent of Africa.

In both cases, Iraq in 2003 and Libya in 2011, false reasons – lies – were put forth to mould public perceptions in favor of military action to remove those nations’ leaders. The nations of Iraq and Libya, the men, women and children living in those countries, have suffered tremendously ever since those military attacks, and today both nations are in extremely difficult situations struggling to recover some semblance of peace, security and economic normalcy. Depending on the extent to which assertions that monetary choices in Iraq and Libya were the major factor leading to military action to protect the dollar are reflective of truth, one could come to view BRICS’ entry into international finance competition, potentially resulting in the US dollar’s decreased use in global transactions, as reason for concern over escalation of war and violence.

Any study of unsanitized, accurate records of history – such as “People’s History of the United States” by the late Howard Zinn, “Confessions of an Economic Hit Man” by John Perkins, “The Untold History of the United States” by filmmaker Oliver Stone, “The Secret of Oz” documentary by Bill Still, and many others – provides clear evidence that wars become fought for economic, financial, power/control reasons, and not for noble ideals of “democracy and freedom”. Years-long legal engineering of the secretive and massive trade agreements TPP, TTIP and TiSa could accurately be perceived as economic warfare in response to BRICS nations’ early beginnings, meetings and conferences, and continuing development.

The world is changing at a rapid pace, moving from unipolar to multipolar, and the most important consideration for men and women around the Earth is preventing those strongly opposed to this change from reacting through military force.

It is with the intention of providing greater understanding of the BRICS phenomenon and building awareness of both potential positive and negative consequences that Paulo Nogueira Batista’s (PNB) interview has been shared in this post. As the interview begins, host Oksana Boyko notes that Mr. Batista has been “very critical of some of the fund’s methods”.

PNB: “Sometimes the fund has success stories, sometimes the fund has failures… Often the fund makes mistakes or is misguided in its interventions.”

“There are good reasons and bad reasons for delay in going to the fund. Countries are very reluctant to give up part of their sovereignty, part of their autonomy, in terms of policy-making, and are reluctant to fall into the hands of international bureaucrats. Why? Because, among other reasons, these international bureaucrats, comfortably installed in Washington, visiting countries regularly or on a quarterly basis, are out-of-touch very often with political, social, and even economic realities in the countries that rely on the fund”.

“The international institutions, the IMF and the World Bank, their governance is very skewed – very unequal. So, the North Atlantic countries are in control. And often these countries have a short-sighted view of how these institutions should act, in my opinion. So, you find that powerful countries, powerful stakeholders of the IMF or World Bank, subordinating the institutions to their short-term or medium-term political agendas”.

“The way to hell is paved with good intentions. It’s more than intentions, it’s a political issue. Countries often, not only the North Atlantic powers, but all countries in general, are prone to abuse power. So, you may find institutions that are supposed to be multilateral, or global, obey not the theory or even the rules that they work under but their interests – it’s not malevolence, I wouldn’t say malevolence… If you look at it from a historical perspective, Europeans and Americans have been used to rule the world, and they are adapting with difficulty to the fact that the world is changing very quickly”.

“I think Greece is one of the least successful episodes in IMF history. And there’s no end in sight to the economic crisis of the country. For a number of reasons, but if you look at the unemployment activity, fiscal policy, structural reforms, the political impasse that arose after Syriza’s victory – impasse between Greece and its creditors, the so-called Troika – has led to a deterioration in the situation, and things are coming to a head right now. As we speak, the situation is coming to a, one more cliffhanger, and its not clear at all whether this time you will be able to pull, not only Greece but Greece’s creditors, up from the cliffhanger”.

Host Oksana Boyko asked about the different IMF treatment of Ukraine and Greece.

PNB: “Ukraine can be seen as a second Greece. …Ukraine, the fund is trying to, let’s say learn, from the failure in Greece. Greece was too little, too late in terms of restructuring; that put an extra burden on the problem and the country itself. In the case of Ukraine, not as early as I would have liked. … 2015 – better late than never – and the program calls for restructuring, ironically, June 30. June 30 has become a fateful day both for Greece and Ukraine, as you know Greece has a major payment that’s been bundled for June 30. By the way, for me June 30 is another significant date because that’s my last day at the fund”.

“It’s very important to compare Greece with Ukraine. Are we facing double standards here? Is Ukraine getting better treatment than Greece because the fund has since learned, or is it because Ukraine, for political reasons, has a special treatment that is not granted to Greece? Then you have the political factors. What is the political nature of the government in Kyiv? What is the political nature of the government in Athens? All those questions are not explicitly there always, but they are of course in the background”.

The discussion turns to IMF reform…

PNB: “There’s a change in plateau in terms of cooperation of the BRICS since 2012. So I think that’s one factor. About the fund, I think there’s a sense of disappointment no doubt. For me, for example, I’ve been working so hard on IMF reform in the last eight years… We achieved some things, but much less than I would have expected, say, back in 2010. So I think the west has to decide, does it want to run the institutions that it controls into the ground by making them uncapable of adapting to a changing world in a quick manner, or do they want to realize that, no, the world is changing fast, we need to open space… One Chinese delegate once said, quite rightly, ‘You have a large, very large, and oversized share of a bad cake. Do you want to reduce your share, and have a smaller share of a better cake?’ And that’s the question they haven’t answered”.

“I think the United States did more than vote for reform in 2010. It actually played a very important role in putting forth reform. If you would have asked me five years ago ‘would it be possible for the United States to become the major blocking factor in the implementation of IMF reform?’ I would have answered quite confidently ‘No’. And I would have been wrong, because the US has since become the major blocking factor. Whether it’s a tactical consideration, to put the blame on Congress – ‘I want to do it, but Congress doesn’t allow me’ – I really wouldn’t know”.

Ms. Boyko points out that the US, without reform, has the “best of both worlds”, so why would they want to change?

PNB: “You touch on a very important point. It was a political agreement at the highest level in 2010, that the countries including the BRICS would provide borrowed resources to the fund as a bridge to the implementation of reforms. We did our part, we provided the resources that we pledged, but the reform did not come. So, it’s a matter of whether you want to have a… Does the United States, do the Europeans want to have a big influence on the multilateral world or are they content to just frustrate everyone? That’s the question they need to ask themselves. They have an incentive. The incentive is to keep the value for the international community – let’s put it this way – of institutions that they created, and where they have a controlling interest. If they don’t want to recognize this… Of course, there are internal divisions…”

IMF reform was/is apparently possible without the approval of the US Congress, but because such reforms would have lowered US voting power below the threshold where the US could assert veto power, it became opposed by the US.

Ms. Boyko talked about “western countries more assertive recently than developing countries”….

PNB: “The west is declining in relative terms but it still rules, and the rest of the world is increasing its weight, but it’s perhaps still not used to having a global view of matters. I think the BRICS are a partial exception to that, let me tell you. If I were to select from the non-west part of the planet – a part of the planet that introduces alternative ideas, that has a global view, I would say it’s the BRICS. It’s the BRICS. I think that one advantage that the BRICS have is that we have experienced what it is to be a developing country, relatively poor, debtor to the IMF… As you mentioned at the beginning of our conversation, not so long ago Brazil was under an IMF program. Russia was under IMF program not so long ago, I think in the 90’s. India in the early 90’s.”

“When someone comes to the board, Greece or Ukraine or whatever, we look at the issue and we have the memory. As a young official in the Brazilian government, I was involved in negotiations with the IMF in the 1980’s during the debt crisis. We have the experience so I think we need to use that experience to have an empathetic approach to the problems of other countries”.

Host Oksana Boyko: “…10 years ago 90% of world currency in the form of US dollar, now it’s 60%. If that trend intensifies, it will have significant social, economic, political consequences on the United States. The United States may become subjected to a new kind of experience. Doesn’t that guarantee that Washington will fight tooth-and-nail to prevent the BRICS plans from being realized? … because it threatens its own well-being?”

PNB: “The United States can do a lot, but it can’t do everything. There are certain trends that the United States cannot deal with, although it might wish to. The United States has resisted any reduction of the role of the dollar, so this is a long-standing issue. It will continue well past my departure from this planet. I don’t think we will solve it, but I do think you’re right that we have signs already – especially with China’s rapid rise – that other currencies will become, including emerging market countries, increasingly important in the world”.

Ms. Boyko: “Do you think your expertise will be helpful in undermining the western dominance of the global financial institutions?”

PNB: “I don’t think that’s the way we see it. The way that the BRICS countries see those institutions – the bank in Shanghai and the monetary fund – is not ‘against’ anyone. They’re pro-BRICS and pro-developing countries, so we take a soft approach”.

****

(Thank you to WorldsApart RT at YouTube)

Greek Report On ‘Odious Debt’ Generates World Debate.

by Jerry Alatalo

Some people are aware of the concept “odious debt”, but most people around the world are not – until now.

In 1927, Russian legal theorist Alexander Nahum Sack gave his definition of odious debt:

When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfil one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State. Odious debts, contracted and utilised for purposes which, to the lenders’ knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.

In Greece, the Truth Committee on Public Debt has since April 2015 conducted an audit of government debt contracts to determine whether odious debts were present, and to what extent. What follows is a short summary video (in Greek) then the committee’s preliminary findings.

Odious debt is not something of which the Greek people are unaware. Following the preliminary report, the 2011 documentary “Debtocracy” allows for further study of the odious debt concept – deals exclusively on the issue, including the United States’ repudiation of Iraq’s debt as “odious” (then buried the fact, to prevent other nations from doing the same) in 2002-3 when the Bush II administration began the Iraq War, plus examples/study of Argentina, Ecuador and Greece. The film shows how difficult it was for Ecuadorians to conduct a debt audit – in sharp contrast to today’s Greeks who were not prevented from doing the work.

Syriza won the election in Greece in late January 2015, and in eight weeks since the debt audit started by the Truth Committee on Public Debt the results are in. Using a metaphor, the Greek report on illegal, illegitimate, odious debt is much, much more than a “shot across the bow” to private central banks. Once the report makes its way around the planet, which is certain, international banking will start facing calls for reform of historic proportions. Many other nations around the Earth will soon emulate Greece, form audit committees, and conduct their own national debt audits to find out if odious and illegitimate debts have become incurred. Get used to seeing and hearing the sound of “odious debt” – the term will soon be found in headlines and news rooms everywhere.

****

Report cross-posted from Global Research.

Hellenic Parliament’s Debt Truth Committee Preliminary Findings – Executive Summary of the report:

In June 2015 Greece stands at a crossroad of choosing between furthering the failed macroeconomic adjustment programmes imposed by the creditors or making a real change to break the chains of debt. Five years since the economic adjustment programmes began, the country remains deeply cemented in an economic, social, democratic and ecological crisis. The black box of debt has remained closed, and until now no authority, Greek or international, has sought to bring to light the truth about how and why Greece was subjected to the Troika regime. The debt, in whose name nothing has been spared, remains the rule through which neoliberal adjustment is imposed, and the deepest and longest recession experienced in Europe during peacetime.

There is an immediate need and social responsibility to address a range of legal, social and economic issues that demand proper consideration. In response, the Hellenic Parliament established the Truth Committee on Public Debt in April 2015, mandating the investigation into the creation and growth of public debt, the way and reasons for which debt was contracted, and the impact that the conditionalities attached to the loans have had on the economy and the population. The Truth Committee has a mandate to raise awareness of issues pertaining to the Greek debt, both domestically and internationally, and to formulate arguments and options concerning the cancellation of the debt.

The research of the Committee presented in this preliminary report sheds light on the fact that the entire adjustment programme, to which Greece has been subjugated, was and remains a politically orientated programme. The technical exercise surrounding macroeconomic variables and debt projections, figures directly relating to people’s lives and livelihoods, has enabled discussions around the debt to remain at a technical level mainly revolving around the argument that the policies imposed on Greece will improve its capacity to pay the debt back. The facts presented in this report challenge this argument.

All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.

It has also come to the understanding of the Committee that the unsustainability of the Greek public debt was evident from the outset to the international creditors, the Greek authorities, and the corporate media. Yet, the Greek authorities, together with some other governments in the EU, conspired against the restructuring of public debt in 2010 in order to protect financial institutions. The corporate media hid the truth from the public by depicting a situation in which the bailout was argued to benefit Greece, whilst spinning a narrative intended to portray the population as deservers of their own wrongdoings.

Bailout funds provided in both programmes of 2010 and 2012 have been externally managed through complicated schemes, preventing any fiscal autonomy. The use of the bailout money is strictly dictated by the creditors, and so, it is revealing that less than 10% of these funds have been destined to the government’s current expenditure.

This preliminary report presents a primary mapping out of the key problems and issues associated with the public debt, and notes key legal violations associated with the contracting of the debt; it also traces out the legal foundations, on which unilateral suspension of the debt payments can be based. The findings are presented in nine chapters structured as follows:

Chapter 1, Debt before the Troika, analyses the growth of the Greek public debt since the 1980s. It concludes that the increase in debt was not due to excessive public spending, which in fact remained lower than the public spending of other Eurozone countries, but rather due to the payment of extremely high rates of interest to creditors, excessive and unjustified military spending, loss of tax revenues due to illicit capital outflows, state recapitalization of private banks, and the international imbalances created via the flaws in the design of the Monetary Union itself.

Adopting the euro led to a drastic increase of private debt in Greece to which major European private banks as well as the Greek banks were exposed. A growing banking crisis contributed to the Greek sovereign debt crisis. George Papandreou’s government helped to present the elements of a banking crisis as a sovereign debt crisis in 2009 by emphasizing and boosting the public deficit and debt.

Chapter 2, Evolution of Greek public debt during 2010-2015, concludes that the first loan agreement of 2010, aimed primarily to rescue the Greek and other European private banks, and to allow the banks to reduce their exposure to Greek government bonds.

Chapter 3, Greek public debt by creditor in 2015, presents the contentious nature of Greece’s current debt, delineating the loans’ key characteristics, which are further analysed in Chapter 8.

Chapter 4, Debt System Mechanism in Greece reveals the mechanisms devised by the agreements that were implemented since May 2010. They created a substantial amount of new debt to bilateral creditors and the European Financial Stability Fund (EFSF), whilst generating abusive costs thus deepening the crisis further. The mechanisms disclose how the majority of borrowed funds were transferred directly to financial institutions. Rather than benefitting Greece, they have accelerated the privatization process, through the use of financial instruments.

Chapter 5, Conditionalities against sustainability, presents how the creditors imposed intrusive conditionalities attached to the loan agreements, which led directly to the economic unviability and unsustainability of debt. These conditionalities, on which the creditors still insist, have not only contributed to lower GDP as well as higher public borrowing, hence a higher public debt/GDP making Greece’s debt more unsustainable, but also engineered dramatic changes in the society, and caused a humanitarian crisis. The Greek public debt can be considered as totally unsustainable at present.

Chapter 6, Impact of the “bailout programmes” on human rights, concludes that the measures implemented under the “bailout programmes” have directly affected living conditions of the people and violated human rights, which Greece and its partners are obliged to respect, protect and promote under domestic, regional and international law. The drastic adjustments, imposed on the Greek economy and society as a whole, have brought about a rapid deterioration of living standards, and remain incompatible with social justice, social cohesion, democracy and human rights.

Chapter 7, Legal issues surrounding the MOU and Loan Agreements, argues there has been a breach of human rights obligations on the part of Greece itself and the lenders, that is the Euro Area (Lender) Member States, the European Commission, the European Central Bank, and theInternational Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human rights violations as an outcome of the policies they obliged Greece to pursue, and also directly violated the Greek constitution by effectively stripping Greece of most of its sovereign rights. The agreements contain abusive clauses, effectively coercing Greece to surrender significant aspects of its sovereignty. This is imprinted in the choice of the English law as governing law for those agreements, which facilitated the circumvention of the Greek Constitution and international human rights obligations. Conflicts with human rights and customary obligations, several indications of contracting parties acting in bad faith, which together with the unconscionable character of the agreements, render these agreements invalid.

Chapter 8, Assessment of the Debts as regards illegtimacy, odiousness, illegality, and unsustainability, provides an assessment of the Greek public debt according to the definitions regarding illegitimate, odious, illegal, and unsustainable debt adopted by the Committee.

Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is currently unable to service its debt without seriously impairing its capacity to fulfill its basic human rights obligations. Furthermore, for each creditor, the report provides evidence of indicative cases of illegal, illegitimate and odious debts.

Debt to the IMF should be considered illegal since its concession breached the IMF’s own statutes, and its conditions breached the Greek Constitution, international customary law, and treaties to which Greece is a party. It is also illegitimate, since conditions included policy prescriptions that infringed human rights obligations. Finally, it is odious since the IMF knew that the imposed measures were undemocratic, ineffective, and would lead to serious violations of socio-economic rights.

Debts to the ECB should be considered illegal since the ECB over-stepped its mandate by imposing the application of macroeconomic adjustment programs (e.g. labour market deregulation) via its participation in the Troïka. Debts to the ECB are also illegitimate and odious, since the principal raison d’etre of the Securities Market Programme (SMP) was to serve the interests of the financial institutions, allowing the major European and Greek private banks to dispose of their Greek bonds.

The EFSF engages in cash-less loans which should be considered illegal because Article 122(2) of the Treaty on the Functioning of the European Union (TFEU) was violated, and further they breach several socio-economic rights and civil liberties. Moreover, the EFSF Framework Agreement 2010 and the Master Financial Assistance Agreement of 2012 contain several abusive clauses revealing clear misconduct on the part of the lender. The EFSF also acts against democratic principles, rendering these particular debts illegitimate and odious.

The bilateral loans should be considered illegal since they violate the procedure provided by the Greek constitution. The loans involved clear misconduct by the lenders, and had conditions that contravened law or public policy. Both EU law and international law were breached in order to sideline human rights in the design of the macroeconomic programmes. The bilateral loans are furthermore illegitimate, since they were not used for the benefit of the population, but merely enabled the private creditors of Greece to be bailed out. Finally, the bilateral loans are odious since the lender states and the European Commission knew of potential violations, but in 2010 and 2012 avoided to assess the human rights impacts of the macroeconomic adjustment and fiscal consolidation that were the conditions for the loans.

The debt to private creditors should be considered illegal because private banks conducted themselves irresponsibly before the Troika came into being, failing to observe due diligence, while some private creditors such as hedge funds also acted in bad faith. Parts of the debts to private banks and hedge funds are illegitimate for the same reasons that they are illegal; furthermore, Greek banks were illegitimately recapitalized by tax-payers. Debts to private banks and hedge funds are odious, since major private creditors were aware that these debts were not incurred in the best interests of the population but rather for their own benefit.

The report comes to a close with some practical considerations. Chapter 9, Legal foundations for repudiation and suspension of the Greek sovereign debt, presents the options concerning the cancellation of debt, and especially the conditions under which a sovereign state can exercise the right to unilateral act of repudiation or suspension of the payment of debt under international law.

Several legal arguments permit a State to unilaterally repudiate its illegal, odious, and illegitimate debt. In the Greek case, such a unilateral act may be based on the following arguments: the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights; preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika; coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution; and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors , which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights. As far as unsustainable debt is concerned, every state is legally entitled to invoke necessity in exceptional situations in order to safeguard those essential interests threatened by a grave and imminent peril. In such a situation, the State may be dispensed from the fulfilment of those international obligations that augment the peril, as is the case with outstanding loan contracts. Finally, states have the right to declare themselves unilaterally insolvent where the servicing of their debt is unsustainable, in which case they commit no wrongful act and hence bear no liability.

People’s dignity is worth more than illegal, illegitimate, odious and unsustainable debt

Having concluded a preliminary investigation, the Committee considers that Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.

Making this preliminary report available to the Greek authorities and the Greek people, the Committee considers to have fulfilled the first part of its mission as defined in the decision of the President of Parliament of 4 April 2015. The Committee hopes that the report will be a useful tool for those who want to exit the destructive logic of austerity and stand up for what is endangered today: human rights, democracy, peoples’ dignity, and the future of generations to come.

In response to those who impose unjust measures, the Greek people might invoke what Thucydides mentioned about the constitution of the Athenian people: “As for the name, it is called a democracy, for the administration is run with a view to the interests of the many, not of the few” (Pericles’ Funeral Oration, in the speech from Thucydides’ History of the Peloponnesian War).

**********

“Debtocracy” | 2011 documentary about Greece, Argentina, Equador and those nations’ odious debt.