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Dr Margot Salomon, LSE, chaired and introduced the panel, highlighting that the application of standards of justice to the topic of foreign debt is overdue. Issues of sovereign debt, austerity and aspects of economic reform have plagued countries for decades. This panel considered what change could look like.
Dr Salomon began by considering what justice requires. She described the situation in Greece whereby the first IMF-Eurozone loan converted private debt into public debt by bailout out European banks and along with austerity Greek debt skyrocketed. The number of people facing material deprivation has nearly doubled since 2009. She also drew attention to the possibility that coercion has emerged as an international custom. The demands that the public interest is directly accounted for, including that debt arrangements should be tested against the states capacity to pay is still largely restricted to the realm of rhetoric. Speaking from her experience contributing to the Special Committee of the Hellenic Parliament on the Audit of the Greek Greek Debt (Debt Truth Committee), Dr Salomon explained that international actors acted in disregard of concern over the states’ capacity to repay the loans and to factor in the socio-economic rights of the people. (See Legal Brief Prepared for the Special Committee of the Hellenic Parliament on the Audit of the Greek Debt (Debt Truth Committee: Economic Policy Conditionality, Socio-Economic Rights and International Legal Responsibility : The Case of Greece 2010-2015, 13 July 2015 by Olivier De Schutter & Margot E. Salomon.)
Dr Salomon also drew attention to the practice of pushing questions of debt and justice out of UN forums to institutions where the industrialised countries hold the balance of power. For example, the position of the EU was to vote against the General Assembly principles on sovereign debt restructuring mechanisms as it was held these should be matters for the IMF to deal with. Furthermore, repression of civil and political rights is part of the restructuring process, with police violence common. Dr Salomon highlighted that economic historians have established that austerity in Europe consistently gives rise to forms of fascism. Dr Salomon urged that people are not merely alleged beneficiaries, at some undisclosed time in the future of some or other restructuring programme but that there is a need to resituate people at the centre of international financial institutions in the present. This was the impetus behind the present panel.
Professor Odette Lienau, Cornell Law School, spoke on justice and sovereign debt. She argued that a reluctance to put justice and sovereign debt together underpins a sense of resistance to critique and change. Dr Lienau highlighted that the ‘sovereign state’ is not a ‘natural’ entity and that we must consider how to think about the sovereign state in a modern sense, not in the historical sense of states reigned by a sovereign ruler. In addressing issues of justice and sovereign debt, we must think about rationales for the sovereign state. In a modern sense this may be associated with the well-being of the nation, she suggested, and any attempt to divorce the sovereign state from its rationale is analytically incoherent.
George Katrougalos, Greek Minister of Labour and Social Security, spoke on human rights and loan agreements. He started by posing two questions: (i) Is it possible to transpose to the international level the democracy of the nation state? And; (ii) Is it possible to have democratic discussion of technical (economic) decisions, at either the international or national level?
Dr Katrougalos, agreed with points already made that there is a view that some issues must be isolated from the political arena. He argued that we must reaffirm the possibility of democratic principles in relation to the international focus on debt restructuring as the Greek people have done in the referendum. Moreover, he argued the loans are a constitutional matter. All of the loans treaties have had an effect on human rights accountability: The Greek Court of Audit declared the unconstitutionality of loan agreements and the Council of Europe’s European Committee of Social Rights announced that the 2012 MoU imposed by the ‘Troika” (the European Commission, European Central Bank, and International Monetary Fund,) was effectively violating specific provisions of the European Social Charter.
Although Greece failed to reverse austerity policies it has nonetheless tried to remedy the problem of transparency by reporting on the social impact of measures and attempting to neutralise measures of the Memorandum of Understanding that have a negative impact on social rights, to mitigate the most negative consequences of the MoU. Greece failed to change the balance of political forces he concluded, but it has tried to direct the EU towards progress on justice for the future.
Aldo Caliari, Center of Concern, pointed out that Greece has austerity by debt whereas some countries have austerity by choice. At present we have a ‘non-system’ of rules and practices, there is no coherence in the system of loans and debts, he argued. Consequently, it is very difficult to embed a human rights approach in international financial institutions as it must be embedded in so many different places and forums. Relief initiatives starting in 2005 and stemmed from an understanding that many countries are being pushed to extremes.
Mr Caliari argued that the concept of ‘debt sustainability’ should not only be a technical exercise, - there should be a moral assessment underpinning it, as George stated. He also said that in initial discussions around the MDGs there was the sense that countries should be able to meet the MDGs first and consider repayments second. The MDGs soon became a technical exercise however and this sense was lost. He concluded by stating that human rights have not been very useful in sovereign debt discourses. – “We are after all talking about sovereign debt – one of the oldest instruments of inter-state domination,” he said.
The speaker’s presentations were followed by a moderated question and answer discussion. A brief selection is below:
MS: How should we understand the general rule of pacta sunt servanda in regard to justice and sovereign debt?
OL: There is inconsistency here as rules can be breached on grounds of other principles such as frustration or necessity. Also, it is relevant to clarify which contract we are talking about, as there are several obligations at play.
GK: (Agreed.) PSS also applies to international human rights treaties.
MS: What bearing does the principle of consent have in practice when, in situations such as Greece, states are coerced into agreements?
GK: Coercion is the relevant issue here. Coercion covers the threat of non-military action and it also covers economic pressure. Often the economic pressure removes any space for conditionality attached to loans.
MS: What can fundamental principles of international human rights law do to bolster these loan agreements?
AC: Human rights should inform negotiations and contracts. It is stipulated in the UNGPs that states should ensure that negotiations and agreements with private actors respect human rights law and policy space. Ultimately it comes down to a conflict of law and a normative hierarchy that can be difficult to challenge.
There were diverse questions from the audience including a question on the responsibilities of states to repay their loans. There was consensus across the panel that that responsibility “cuts both ways”, i.e. that it should apply to the lender as well as to the borrower.