Alternative Solutions to the Debt Crisis
Aiming to highlight and to discuss alternative solutions to the debt crisis, academics, politicians and activists met in March 2014 at the international conference organized by the Rosa-Luxemburg-Stiftung and the European Network on Debt and Development (eurodad). They presented their ideas on solving the debt crisis to over 80 participants in Brussels.
First we asked about the political prospects for alternative ways out of the debt crisis. Politics have failed in handling the crisis, said Axel Troost, member of the parliamentary group of DIE LINKE. in the German Parliament. An enormous amount of public money had been spent to save banks after the Lehman-crash, which led to huge sovereign debts in many countries. Moreover, the construction of the European Monetary Union shows crucial flaws. As an alternative, Troost suggests European investment programs along with wealth taxes and a tax on financial transactions.
The economist John Milios from the SYRIZA party in Greece also blames austerity politics for the current situation. He demands a partial cut of sovereign debts for the over-indebted countries of the euro-zone along with a growth clause, similar to the London Agreement on German External Debts from 1953. Moreover, he suggests that the European Central Bank (ECB) re-finances banks according to precise social and ecological criteria.
The former advisor to Iceland’s finance ministry Huginn Freyr Þorsteinsson showed how Iceland dealt with its banking crisis and insisted on the necessity of sufficient political will to find alternative exits from debt crises. „It took neo-liberalism five years to take down a bank that had survived two world wars“ said Þorsteinsson in regards to the Icelandic Landesbanki, which collapsed in 2008, after the liberalization and privatization of Iceland’s banking sector. When “banking went mad” in Iceland in 2007 and the country’s foreign debt had increased by more than tenfold compared to the Gross domestic product (GDP), Island implemented capital controls and raised taxes for the most wealthy while trying to keep cuts on welfare and for people with lower income as low as possible. In terms of wealth distribution Iceland is today the fairest country of the world, according to the GINI index.
Ecuador also chose an unconventional way to deal with its sovereign debts, as former Minister for Energy and Mines Alberto Acosta explained. Ecuador’s president Rafael Correa refused to pay the country’s sovereign debts, which amounted to almost 50% of the GDP in the 2000s, and kicked the representatives of the International Monetary Fund (IMF) out of the country. Alberto Acosta encouraged other over-indebted countries to implement similar measures, yet he also warned that this would not be a long term solution.
Moreover, there is a crucial difference between Iceland, Ecuador and Argentina on the one hand and Greece, Portugal and Spain on the other: the latter are all members of the euro-zone. Therefore, as most of the panelists agreed upon, the examples of the first three countries mentioned cannot be transferred to euro-zone countries without restriction. Gabi Zimmer, head of the GUE/NGL parliamentary group emphasized the need for a strong left in the European Parliament to change the way Europe is handling the crisis.
We also focused on how the countries of the Arab Uprisings dealt with the over-indebtedness as a result from the time of dictatorship. The case of Tunisia was explored by the member of Tunisia’s constitutional assembly Mabrouka M’barek and the Tunisian academic and activist Fathi Chamkhi. Chamkhi strongly opposed that Tunisia accepted the IMF to implement austerity measures after the overthrow of Zine el-Abidine Ben Ali.
Last but not least we looked into the problem of private debts. Emma Bryn-Jones from the British organization Zero-Credit presented her studies on consumer’s credits in the United Kingdom, where two thirds of over indebted persons are women. Susanne Soederberg from Canada’s Queen’s University raised the question about the political dimensions of private debts, which she calls debtfarism. She showed how the subprime lending industry in the United States discovered a promising market in students’ loans. Since the privatization of the US bank for students’ credits Sallie Mae in 1996 the students’ credits became the largest business for unsecured credits in the US. The turnover for SLAGS (asset backed security collateralized by student loans) amounts billions of dollars, numerous students end up in the debt trap and are victims of “the structural violence inherent in the debt relations that mark the poverty industry.” Soederberg’s tongue in cheek proposal for an alternative solution would be the Ecuadorian way: “Just refuse to repay the debts.”
Numerous alternative solutions to debt crises had been presented in the three days long conference. Nevertheless, in many European countries the people are no longer willing to passively tolerate the failure of politics and began to take their fate in their own hands. Activists from Spain reported about the Plataforma de Afectados por la Hipoteca and their successful fight against evictions. Greek activists presented the “Solidarity for all” campaign, which helps people to cope with the fatal repercussions of the failed politics in times of crisis.