This panel was convened at 1:00 pm, Thursday, March 31, 2016 by its moderator, Margot Salomon of the London School of Economics and Political Science, who introduced the panelists: Odette Lienau of Cornell University Law School; George Katrougalos, Minister of Labour and Social Security of the Hellenic Republic, and of Democritus University; and Aldo Caliari, Director of the Rethinking Bretton Woods Project at the Center of Concern.
INTRODUCTORY REMARKS BY MARGOT E. SALOMON *
This is a timely topic--the mere mention of Greece, Argentina, and Puerto Rico confirms that claim. The issues of sovereign debt and international finance more generally, are well overdue for being subjected to standards of justice. Both the global financial crisis and the international and institutional responses to it brought to bear a human crisis in European periphery countries in the past few years that has exposed the absence of justice and given concerns some prominence. Of course, foreign debt, along with the familiar responses by international institutions of conditioning economic policy according to neoliberal prescriptions, have plagued the people of developing countries since the 1970s. (1) The European debt and justice crisis has made it a first world issue; perhaps now it will receive the kind of attention that can compel change.
Why does the issue of sovereign debt and responses to it need to be subjected to justice and what does justice require? The recent case of Greece will provide some insight. Prior to the first "Greek" bailout in 2010, the International Monetary Fund (IMF) Executive Board agreed to circumvent its "exceptional access policy" to lend to a country with unsustainable debt (here "sustainable" debt is understood as the ability of a country to meet its debt obligations without requiring debt relief or accumulating arrears). The loan came from the IMF and the pooled bilateral loans of Eurozone states and went to shield German, French, and Greek banks holding Greek bonds from losses. In this way, the loan converted private debt into public debt and was combined with austerity as a condition of the loan--which shrank the economy and which no reasonable economist supported then or supports now, in the case of Greece. Greek debt skyrocketed, as was predicted. What followed was six years of deep and prolonged recession, during which the economy lost a quarter of its GDP. (2)
From a human rights perspective, a few brief examples will set the stage. There has been an "unprecedented rise in unemployment" in Greece since 2008, (3) with recent accounts providing a figure of 27.5 percent, 6.5 percent higher for women, and close to 50 percent for youth. (4) The number of people who live in households that cannot keep their home adequately heated doubled since 2010, from 15.4 percent to 32.9 percent in 2014. (5) Public health expenditures saw cuts of 42 percent within the five year period. (6) Education expenditure decreased heavily between 2009 and 2013, with spending on secondary schools, for example, reduced by 24.4 percent. (7) In its 2015 Concluding Observations on Greece, the UN Committee on Economic, Social and Cultural Rights noted that: the population at risk of poverty increased severely since 2010, reaching 36 percent in 2013; (8) the current level of minimum wage was insufficient to provide workers and their families with a decent living; (9) and social security coverage and benefits are inadequate to ensure even a decent living for the recipients and members of their families, in contravention with rights protected under the International Covenant on Economic, Social and Cultural Rights. (10)
What we plan to do with our time here is to explore a range of topics--from the normative to the practical--that animate part of the current international conversation on debt. To set the ground for our series of inquiries on the topic of debt and austerity as if justice mattered, I would like to propose a few core ideas:
It is of little doubt that the issue of debt repayment and debt sustainability has given rise to what some commentators refer to as a "global public concern in international law," inviting a shift away from an exclusive focus on the priorities of creditors (11) to a wider set of values both in the process of debt restructuring (e.g., good faith and transparency) and substantively, for example in reinterpreting debt sustainability to imply that sovereign debt restructuring workouts include economic growth and sustainable development, minimize economic and social costs, and respect human rights. (12) Challenges to the norm of an absolute obligation to repay in full is also part of this new thinking (13) There are a range of official initiatives that point us in a new direction, including the General Assembly Resolution on Basic Principles on Sovereign Debt Restructuring Processes of September 2015, the Guiding Principles on Foreign Debt and Human Rights adopted by the UN Human Rights Council in 2012, and the UN Conference on Trade and Development's Principles on Promoting Responsible Sovereign Lending and Borrowing.
But it is too early to celebrate a shift. Positive normative trends have not been met by practice. Indeed what we have seen recently are familiar scenarios more aligned to exposing fragmentation in international law and coercion as an international legal custom. The demands that the public interest be directly accounted for--including that the settlement of a sovereign debt crisis must be designed to ensure that a debtor state can fulfil its social-economic rights obligations--exist still but in the realm of rhetoric.
In my own work on the subject of austerity and human rights in Greece, (14) and in the legal brief I wrote with Olivier De Schutter for the Special Committee of the Hellenic Parliament on the Audit of the Greek Debt, (15) I was struck by the fact that the international actors involved in the negotiation and implementation of the 2010 and 2012 memoranda of understanding with Greece acted in total disregard of international human rights, and that they had not even taken elementary precautions of assessing the potential impacts on the level of enjoyment of human rights of the measures they were recommending.
I propose that what we are seeing is a rhetorical awareness toward justice based solutions, but not (yet) a shift. We might be reminded that the General Assembly Principles on Sovereign Debt Restructuring Processes saw the major developed countries voting against it, (16) emphasizing that this is a matter best pursued in the IMF--despite the fact that the IMF, for its part, has long resisted calls to take into account human rights in the execution of its mandate. Giving effect to the oft-stated claim by the Committee on Economic, Social and Cultural Rights that states have extraterritorial obligations in the area of socioeconomic rights, when acting individually and collectively, is both directly relevant to the concerns raised here and will represent an uphill battle when it comes to implementing those obligations.
There is of course another way in which human rights are implicated here, and that is through the necessary repression of civil and political rights as part of the restructuring processes we have seen, for example police violence to quell protests and restrictions on freedom of expression and assembly. In fact, economic historians have consistently demonstrated that in Europe, austerity has given rise to fascism.
To wrap up this brief introduction--perhaps I might end where I began--with the idea of the public interest. Here the central point is that the public interest can no longer be understood as coterminous with repaying creditors or stabilizing the economy. The people are not merely alleged beneficiaries of some other program. The turn that has begun, but is only just underway, is to resituate people at the center of international finance. Today's panel is, accordingly, about the fundamental principles of proscribing coercion in international affairs, receiving consent by the governed and ensuring human rights, and the various ways international law might yet make that happen.
CONNECTING SOVEREIGN DEBT TO QUESTIONS OF JUSTICE