At the June, the 1st of 2015, the human rights activist Sarah Luzia Hassel-Reusing has filed a submission to the debt truth commission of the Greek Parliament.
It explains comprehensively grave irregularities regarding the Greek debts and conditions connected to them. And it makes concrete recommendations, how to calculate the illegitimate and odious parts of the debts.
The Greek population has a right to get to know about those irregularities. Even though that submission focuses on the features relevant for the illegitimateness and the odiousness of debts, it will also contribute to a deeper understanding, for which purposes the health and the lives of so many innocent Greek people are being sacrificed. Mrs. Zoe Konstantopoulou, the President of the Greek Parliament, has been completely right, when she has regarded the partly destruction of the Greek population to be a crime against humanity (art. 7 Roman Statute); the people responsible for the illegitimate and odious conditions imposed on Greece are just more geographically and institutionally distributed, and more of them from the private sector, than it might seem.
They provenly do it to enable a huge shift of money from the states and from the citizens to the banks, while pretending to rescue Greece or the currency euro. Banks have deliberately withheld the information, that giral money is created out of nothing in the moment of the granting of a loan by a bank, and it is deleted, when the loan is paid back. What banks have known for centuries, has been empirically proven by economical science in September 2014. This shows very clearly, that every bank is replacable, that there are no „systemic“ „too big to fail“ banks at all. And what an obvious difference to the value of the lifes of human beings and of their birth and death.
Moreover, the main aim is to force the countries of the eurozone into the state insolvency procedure of the ESM, in order to put through the privatization of their public utilities, resources, and particularly of their administrations, their courts, and their institutions for inner and outer security. Already the Lisbon Treaty has inserted the prescriptions demanding the functional privatization of the public utilities („services of general economic interest“, art. 14 TFEU) and of the sovereign institutions („non-economic services of general interest“, art. 2 of protocol 26 to TEU and TFEU), the latter of which, however, has been prohibited by the Lisbon Judgement of the German Constitutional Court of the 30.06.2009.
The ESM, but also so-called „free trade“ treaties (TTIP, TISA, and CETA) are the next tools to enforce that revolutionary change of the type of state of the EU member states into the so-called „guarantueeing state“, where the sovereign power is in the hands of private corporations, a de-facto private state, with government and parliament remaining as the last elected facades.
Prof. Dr. Andreas Voßkuhle, the President of the German Constitutional Court, has already in 2002 provenly lobbied for the functional privatization of parts of the sovereign institutions of the states; as he has pointed out in thesis 12 of his then speech before the VVDStRL, giving sovereign powers to private actors is completely unconstitutional, and it deprives the countries of their control over the execution of their sovereign power.
And in September 2015, even a universal state insolvency procedure is going to be concluded at the UN level. As shown in the submission to the Greek debt truth commission, it is rather going to become a kind of ESM at the world level, for the functional privatization of the public utilities and the sovereign institutions of overly indebted states world-wide, than a mechanism for a fair debt reduction at the standard of the human rights.
The political cartel of Bilderberg has had, for decades, a significant influence particularly on the EU Commission, but also on other international organizations and bodies and on national governments.
The first chairman of Bilderberg (Prince Bernhard of the Netherlands) and the first President of the EU Commission (Walter Hallstein) both had been lobbyists of the IG Farben before – showing a link right from the beginning with a view to systematic corporate undermining of democracy in Europe via the EU Commmission.
Mr. Jose Manuel Barroso has been the President of the EU Commission, when the mechanisms of the European Financing Mechanism („Greece Support“, EFSM, EFSF, and ESM) and of the EU Economic Government (tightened Stability and Growth Pact, Imbalance Procedure, and Budgetary Surveillance) have been created – all under the pretext of the safeguarding of the currency euro. He has been several times at the Bilderberg conference during his presidency. Since 2015, he is in the steering committee of Bilderberg. The current President of the EU Commission, Jean-Claude Juncker, has been connected with Bilderberg for many years. The Bilderberg conference 2011 has dealt with the ESM and been attended by, i. a., the then President of the European Council and by the then Financial Ministers of Greece, Great Britain, and Italy. The Bilderberg conference 2015 has had Greece on its agenda with, i. a., Mr. Jeroen Dijsselbloem (President of the Eurogroup), Mr. Benoît Coeuré (board member of the ECB), and Mr. Karel de Gucht (former EU Trade Commissioner); just look at the behaviour of those people regarding the subjugation of Greece under the ESM and regarding so-called „free trade“.
The gravest irregularity, however, is the systematic outflanking of the human rights in the course of the drafting and the decisions on the imposed conditions, and that the strictness of the imposed austerity measures have been explicitely wanted as strict as in the „practice“ respectively as the „modalities“ of the IMF (Ecofin Council, 09.05.2010, file number SN 2564/1/10) – even though any serious Financial Minister must have known at least since 1991, that UNICEF has accused IMF and World Bank to be responsible for the death of up to seven million children below the age of five years world-wide alone in the years 1982 – 1991 (p. 12 of the foreword of the economist and former IMF employee Davison Budhoo in „Genug ist Genug“, published via Heinrich Böll Foundation in 1991).
The civil population of Greece has been deliberately and strategically targeted with shocks. The referendum has been used to create a symbol of hope, and then to destroy it very fast, in order to cause confusion and a feeling of frustration and hopelessness. That is where they want the have the Greek people. And the subjugation under the ESM is by far more drastic than the EFSF conditions, which had been rejected by the referendum. The actors see the people as chesspieces on their geostragical playground. As Prof. Joseph Stiglitz has explained it in 2001 regarding the IMF, unbearable austerity measures are also used to create riots as a means to put through privatization far below market prices.
I recommend you to remain peaceful centered in your heart. The solidarity clause (art. 222 of the Treaty on the Functioning of the European Union, TFEU) and the prescriptions for its application (file number 2014/415/EU) have been created to violently quell down protests with the joint use of the armies of the EU member states. The deliberation of the then President of the EU Commission, Mr. Jose Manuel Barroso regarding a possible vanishing of democracy at Greece, Portugal, and Spain, if these countries failed to manage the crisis (Daily Mail article „Nightmare vision for Europe as EU chief warns ‘democracy could disappear’ in Greece, Spain, and Portugal“ of the 15.06.2010) needs to be taken serious in this context.
Please listen closely. The following information is crucial. What everyone of you can do, is to inform many people of the following submission, and to discuss it with friends. The next necessary steps for the peaceful restoration of the order of the Greek Constitution and of the order of the universal human rights in Greece and in the other EU member countries will then become visible.
The peoples of the countries of Europe including the Greeks need a transformation to humanity rather than a revolution. They need to resolutely, centered in their hearts, without any fear or hate, with the unshakable will to rebuild a human society.
Sarah Luzia Hassel-Reusing Wuppertal (Germany) human rights activist +49/202/2502621 e-mail: chatling @ gmx.de
Sarah Luzia Hassel-Reusing Thorner Str. 7
42283 Wuppertal (Germany) 49/202/2502621
human rights activist
to the Truth Commission
on the Greek Public Debt
Parliament Mansion (Megaro Voulis) GR-10021 Athens
Dear ladies and gentlemen,
herewith I submit to you some crucial pieces of information regarding grave irregularities around the Greek debt.
I have learned from the speeches by Mrs. Zoe Konstantopoulou, the President of the Greek national Parliament, after the conclusion to set up the Truth Commission and in April 2015 before the Italian national Parliament, as well as from the Avgi interview with Mr. Eric Toussaint, the scientific coordinator of the Truth Commission, that its aim is to investigate irregularities around the Greek public debt, and to come to conclusions, which parts of it is odious, illegitimate, illegal, or unsustainable.
According to art. 1 par. 2 Basic Law, the German people confesses, because of the inviolable human dignity, to invulnerable and inalienable human rights as the basis of every human community, of peace, and of justice in the world. That prescription, which is, as a part of art. 1 Basic Law, protected by the eternity guarantuee (art. 79 par. 3 Basic Law), is a connection to the universal human rights, and it obliges all Germans to stand up for peace and for the universal human rights. A legally binding obligation to peace and human rights for all Germans has been a decisive precondition by the then US Foreign Minister James F. Byrnes in his famous speech in Stuttgart, in order to allow the USA to accept, that Germany could get to wealth again.
I am adressing to you, as a human rights activist, and also in order to do my part of this human rights obligation of all Germans.
Section IV. of this submission is of particular importance, because it describes the state insolvency procedure, which is going to start in July 2015 for Greece (see particularly section IV.4.6 of this submission). And section VI. shows, how Greece can be protected against the intended total sell-off of its public utilities and sovereign institutions, and how Greece can get out of the crisis. Suggestions how to calculate respectively to estimate the odious and the illegitimate part of the debts, are each in the part „conclusions“ in the beginning of each of the sections III – VIII. of this submission.
This submission contains information, which might be shocking depending on the prior state of knowledge. So I recommend the following exercise in order to get into a conscious, neutral, state of awareness. Imagine your own awareness moving from the head and from the belly slowly into the heart within about 2 minutes. Then start reading further.
Structure of this submission
I. What are illegitimate respectively odious debts ?
II. Illegitimate debts, debt sustainability and human rights
III. Pretext for bank safeguarding and money redirection
IV. Pretext for state insolvency procedure and privatization of services of general interest
V. Inhumane strictness
VI. Non-disclosure regarding the creation of giral money, „too big to fail“ untenable
VII. Germany has not validly consented to the EFSF Framework Treaty
VIII. Presumption of more powers like those of occupying powers against national constitutions
I. What are illegitimate respectively odious debts ?
The doctrine of odious debts has been formalized in 1927 by the Russian jurist Alexander Nahum Sack.. It today is applied and discussed beyond its original scope.
The entry in the wikipedia dictionary on „odious debt“ quotes him as follows:
„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 nation – when it succeeds in overthrowing the government that contracted them – unless the debt is 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.“
As the wikipedia article informs further, the doctrine of odious debt has already been applied in the state practice beyond the scope of dictatorial regimes. The USA have applied it to free Cuba from its debts incurred under the Spanish colonial regime. Mexico has reputed debts incurred under the monarch Emperor Maximilian. Ecuador has expanded the application of the principle also on debts incurred under corrupt regimes.
As a result, the doctrine is obviously not limited to dictatorial regimes in a narrower sense, but also includes colonialist and monarchical and even (democratically elected, but) corrupt regimes. As the example of the colonialist regime shows, also external regimes are included, if they have forced the country to incur the debts.
The formulation of the doctrine by Mr. Sack leaves open questions as to where exactly is the limit, what can still be perceived as being within the needs and the interests of the state. It only makes clear, that uses for strengthening the regime are outside that bounds. Furthermore, as a logical result, the enrichment of the regime also is outside of it. And, based on the needs and interests of the state as a precondition, it needs to be concluded, that also uses for the benefit of third parties, which can be neither attributed to the regime nor the population, also are outside any legitimacy of the State debts.
Equally important for the interpretation as the words of Mr. Alexander Nahum Sack and the examples from the state practice is the view in the report of the then UN Independent Expert on the effect of foreign debt and other related international financial obligations on the full enjoyment of all human rights, particularly economic, social, and cultural rights, Prof. Dr. Cephas Lumina, of the
12.08.2009 (file number A/64/289): www2.ohchr.org/english/issues/development/debt/docs/A-64-289.doc
It informs (no. 8), that the principle has been successfully invoked by the USA regarding debts of Cuba, since they had been imposed by the Spanish colonialists and not been used for the benefit of the Cuban people. It has also been claimed by a committee of the British Parliament regarding debts of Rwanda (incurred under a genocidal regime), by the USA regarding debts of Iraq (incurred under a dictatorial regime), and by the Nigerian Parliament regarding Nigerian debts (incurred under a dictator).
The Tegucigalpa Declaration (no. 11) by the Latin American and Carribean Jubilee 2000 Platform of the 27.01.1999 included debts incurred by dictatorial, unelected, and democratically elected but corrupt regimes, and regards as odious loans against the interests of the people, loans incurred with interest rates and under conditions imposed by creditor countries and banks, backed by coercion by IMF and World Bank. Also the use of creditor cartels like the Paris club while at the same time the repudiation of debtor cartels has been regarded as an important factor for the odiousness of debts.
The Canadian Ecumenical Jubilee Initiative has proposed (no. 12) in 2000 a four-part definition of odious debt, firstly debts which cannot be repaid without harming the population (particularly if it endangers the health or the life); secondly debts incurred by illegitimate debtors and creditors acting illegitimately (e. g. to strengthen suppressive regimes); thirdly debts incurred for illegitimate uses (e. g. debts not for the benefit of the people of for fraudulent purposes); and fourthly debts incurred through illegitimate terms (e. g. debts with usurious interest rates).
The Latin-American Parliament has proposed four grounds for illegitimate debts (no. 13):
a) debts of irregular origin
b) debts where the creditor can unilaterally increase the interest rates
c) debts accepted by countries under the Brady Plan agreements, because that plan has allegedly forced governments to accept odious debts as such and only given them renegotiated terms for them d) debts incurred by co-opted government negotiators
The European Network on Debt and Development (no. 14) focuses on debts as illegitimate, which did not benefit the people in the developing countries, and names as possible causes, the misappropriation of the cash by a despotic power, the use of the money by a despotic power for its military or to suppress its own people, or the use for ill-conceived and corrupt development projects.
The African Forum and Network on Debt and Development (AFRODAD) (no. 15) has defined illegitimate debts as „debt incurred by illegitimate debtors and creditors acting illegitimately“, and that „illegitimate debt includes odious debts, loans secured through corruption, usurious loans, and certain debts incurred under inappropriate structural adjustment conditions“.
The Jubilee USA Network (no. 16) has defined 3 categories of illegitimate debt:
-loans given irresponsibly (e. g. the overly generous granting of loans by banks to developing countries in the 1970ies with too little consideration of the debt repayment capacity of those countries)
-loans given during the cold war for ideological and political reasons rather than to promote development
-loans given to countries knowingly, that the money would be misappropriated by corrupt Government leaders
Jubilee South (no. 17) regards debts as illegitimate, which have never benefitted the population in the debtor country, and regards them in the contexts of debts „as a tool of domination that ensures easy access by creditor nations and institutions to the resources of the South“.
Joseph Hanlon (no. 18) defines illegitimate debt as „debt that the borrower cannot be required to pay because the original loan or conditions attached to that loan infringed the law of public policy, or because they were unfair, improper, or otherwise objectionable“. He explicitely excludes loans, which the lender is just not able to repay from the illegitimate debts. He differentiates illegitimate debts into unacceptable ones (which are prima facie void because the original loan involved clear misconduct involved by the lender, violated national law of the borrower or was grossly unfair) and inappropriate debts (loans which might have been acceptable under other circumstances, but not under those in which they have been given). He defines four groups of debts, which could be considered as illegitimate because of the behaviour of the lender, namely unacceptable loans (odious loans, loans to known corrupt officials and for obviously non-viable projects), unacceptable conditions (including usurious interest rates and policy conditions in violation of national laws), inappropriate loans (including consumption loans or loans to countries in need of grants), and inappropriate conditions (including policy lending linked to unsuitable policies).
The New Economic Foundation defines four categories of illegitimate debt: illegal, odious, onerous, and other illegitimate debt (no. 19).
Illegal debt refers to debt incurred disregarding the proper procedures (e. g. without proper authorization of the signatory or without the approval of the borrower country’s parliament).
Odious debt usually means debt incurred, to the full knowledge of the creditor, and without the consent of and used against the interests of the population of the borrower country.
Onerous debt is regarded as unenforceable because of unreasonable terms.
Other illegitimate debt includes environmental debt (in the sense of reducing the financial debts of the poor countries to the rich countries in view of the environmental debt of the rich countries due to their more than equal use of air and water resources), historical debt (resulting from the exploitation in colonial times), and unsustainable debt (if the overall debt cannot be completely serviced without „grave negative impacts on the Government’s ability to fulfil its basic human rights obligations such as to clean water, food, health care, housing, and education“.
II. Illegitimate debts, debt stusatainability and human rights
The report by Prof. Dr. Cephas Lumina, of the 12.08.2009 (file number A/64/289), the then UN Independent Expert on foreign debt and human rights, has demanded are more precise formulation, and that human rights must be part of that definition (summary, no. 30). He reminds (no. 28), that, according to art. 28 UDHR, everyone is entitled to a social and international order, in which the universal human rights of the UDHR can be fully realized, and that the order how to solve illegitimate debt must comply with art. 28 UDHR, and puts his focus on the human rights in art. 25 UDHR (“the right to a standard of living adequate for the health and the well-being of himself and of his family, including food, housing and medical care and necessary social services, and the right to security in the event of unemployment – or other lack of livelihood in circumstances out of his control“). Prof. Dr. Lumina proposes, that the formulation of an internationally accepted definition of illegitimate debts should be guided by the human rights principles of participation, inclusion, transparency, accountability, the rule of the law, equality, and non-discrimination (summary, no. 32).
Even more crucial are the human rights as the standard for debt sustainability. The state debts have to be reduced to an amount, which the state can carry without undermining its human rights obligations (no. 55).
So in a first step, the odious, illegitimate, onerous, and illegal part of the debts needs to be cancelled. Then, the debt sustainability measured at the standard of the human rights is the correct way for a just reduction of the legitimate part of the debts.
That the universal human rights and the basic rights of the national constitution of the respective debtor country have to be the standard for the debt sustainability, becomes also obvious from the legal rank of the universal human rights. Their rank is below the UN Charter (art. 29 no. 3 UDHR, art. 103 UN Charter), but above the rest of the international law (art. 28 UDHR, art. 1 no. 3 UN Charter), except for the Geneva and Haague Conventions of humanitarian law, which are equal- ranking to the universal human rights (ICJ advisory opinion of the 08.07.1996 “Advisory Opinion of the International Court of Justice of 8 July 1996, The Legality of the Threat or Use of Nuclear Weapons, Reports 1996”).
The UN Charter and the universal human rights belong to the „ius cogens“, the highest category of nearly world-wide valid international law (no. 279-282 of the judgement of the EU Court of First Instance on file number T-306/01, and the ICJ advisory opinion of the 08.07.1996 mentioned above).
The legal rank of any national or international debt resolution mechanism is below the universal human rights, so that those mechanisms have to stay within the scope, of what the universal human rights allow. That functions only, if the debt sustainability is measured at the standard of the univeral human rights.
Because of the sovereignty of the states, which is originated in state law, but also guarantueed in art. 2 par. 1 UN Charter, the national constitutions are even one step above the UN Charter and so two steps above the universal human rights. So the basic rights of the respective debtor state have even more weigth for the question of debt sustainability than the universal human rights.
III. Pretext for bank safeguarding and money redirection
The features „overly generous loans“ (Jubilee USA) and „loans to countries in need of grants“ (Joseph Hanlon) of illegitimate debts are fulfilled. And the money for the bank safeguarding has not been for the Greek population. And they have been granted because of the knowingly false presentation of bank safeguarding as the safeguarding of the currency euro. At least those parts of the loans given to Greece via „Greece Support“ or EFSF, which have been used for the recapitalization of Greek banks instead for humanitarian needs, with knowledge of the creditors or even imposed by them, are illegitimate and odious.
In addition to that, the amount of money, which the bailed out old creditors of Greece have received more, than if there had been no bailout, but a normal state bankruptcy at the standard of the human rights, are illegitimate and odious.
III.2 The role of art. 136 par. 3 TFEU and the mechanisms connected to it
The financial crisis in Greece has been used as a pretext for the creation of art. 136 par. 3 TFEU and of the mechanisms of the European Financing Mechanism and of the EU Economic Government. Had a sufficient debt reduction been done earlier and to a sustainable level leaving the country enough money to fulfil its human rights obligations, then the situation Greece would not have been usable any more as a pretext.
From 2008 to 2011, European countries have spent 4.5 trillion € (4.500 billion € !) on financial industry bailouts, which is 37 % of the EU’s econcomic output.
See the press declaration „UN experts call for EU banking sector reform in line with States’ human rights obligations“ of the 05.10.2012 by the UN Independent Experts on extreme poverty, on external debt, and on equitable order.
The independent „human rights experts urged the EU authorities to ensure that vital public funds are not used on collapsing financial firms in the future.“ http://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=12630&LAngID=E
In view of such huge figures, the willingness of the populations all over Europe to give even more public money to the bank safeguarding institutions, has been very limited. In order to be able to give more money to the banks, than the people would ever willingly agree with, it has been falsely presented to the public as a safeguarding of the currency euro. To support that deception, the term „stability of the euro area as a whole“, which provenly is just a metaphore for the financial stability of the financial sector, has been included in art. 136 par. 3 s. 1 TFEU as a carde blanche legal basis for the creation of ever new mechanisms for that purpose, particularly for those of the European Financing Mechanism and of the EU Economic Government.
The wording of art. 136 par. 3 TFEU has been inserted into the EU primary law, whose wording is as follows:
„The Member States whose currency is the euro, may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject under strict conditionality.“ Links: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/118578.pdf
This does, however, not really aim at the stability of the common currency, neither at the inner stability, nor at the stability of the exchange rate, and also not at putting the public finances onto their feet again, but only at the „financial stability“.
This is proven by:
-par. 2+4 of the considerations of the 16./17.12.2010 to the initiation of art. 136 par. 3 TFEU
-no. 11 of the conclusions of the European Council of the 23./24.06.2011, according to which the Prime Ministers want to do everything for the „financial stability“ http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/123075.pdf
The conclusions of the summit of the 24./25.03.2011 prove the definition of „financial stability“ as the stability of the financial sector, i. e. especially of banks. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf
Also the IMF uses the term „financial stability“ with the meaning „stability of the financial sector“.
By means of art. 136 par. 3 TFEU, one wants to be able to create always new mechanisms for the safeguarding of banks, of whom hitherto especially two groups of mechanisms are known, namely those of the European Financing Mechanism („Greece Support“, EFSM, EFSF, and ESM) and those for the enabling of the Economic Government (tightened Stability and Growth Pact, Imbalance Procedure, and Budgetary Survaillance).
All parts of the European Financing Mechanism apply only for the states of the eurozone. The Economic Government applies also to EU member countries, which do not have the currency euro, but have ratified the Fiscal Compact.
In the European Financial Mechanism, the conditions are always drafted by the „Troika“, consisting EU Commission, IMF, and ECB, under the lead of the EU Commission, and are decided by the Financial Ministers respectively by their permanent secretaries (in the EFSF) or (as a possibility in the ESM) by directors, who are chosen by the Financial Ministers.
And the ESM prohibits via collective action clauses every sovereignly managed state bankruptcy, in order to force the countries of the eurozone, when they are bankrupt, into a state insolvency procedure, in which they get additional political conditions by their private creditors. The main function of the state insolvency procedure is the privatization of the public utilities and of the sovereign institutions of the states, i. e., to virtually de-facto gut the sovereignty of the states.
Via the tightened Stability and Growth Pact conditions are imposed on countries with a deficit (of the budgets of the national, regional, and municipal level of the state and of the public social insurance) of more than 0.5 % of the GDP or with a debt of more than 60% of the GDP.
The Imbalance Procedure contains a large set of economic indicators. If a country is over the upper or below the lower limit of a specific indicator, it can be put into the Imbalance Procedure to get conditions regarding any matters of wage, finance, or economic policy, and regarding making non- tradable goods tradable (privatization and opening for the world market). The sense of the Imbalance Procedure is to impose conditions on countries, which have neither a solvency problem, nor excessive deficits or debts.
The draft conditions in the tightened Stability and Growth Pact and in the Imbalance Procedure are filed by the EU Commission and decided by Their Excellencies, the Financial Ministers.
For non-compliance with the imposed conditions of those mechanisms, the states are imposed a fine (called „sanction“) as a specific percentage of the GDP.
Via the Budgetary Surveillance, the EU Commission can draft cuts into important EU funds (Cohesion Fund, Social Fund, Structural Fund, ELER Agrarian Fund, Maritime and Fishery Fund), and the Financial Ministers decide on those cuts (EU regulation 1301/2013), if conditions imposed particularly via the European Financing Mechanism, the tightened Stability and Growth Pact, or the Imbalance Procedure have not been completely fulfilled. And the EU Commission can completely reject the draft regional and national budgets of the member states and publish opinions on them (EU regulation 473/2013).
All these mechanisms are primarily directed to bringing together enough financial means for the securing of the „financial stability“ of the financial sector at the cost of the other inhabitants of the member states.
To the populations of the EU member states, however, it has been pretended, that the aim was the protection of the currency and of the public finances.
As particularly the Imbalance Procedure and the Budgetary Surveillance prove, it has been made sure, that strict conditions obliged to the financial stability of the financial sector can be imposed on all member countries, even if they do not have any acute liquidity problem or excessive deficit or debt problem – except for Great Britain and Czechya, which have neither the euro nor ratified the Fiscal Compact.
It is often claimed, that art. 136 par. 3 TFEU had been introduced only to allow the ESM Treaty from the perspective of the EU law. It has, however, been created a carde blanche legal basis as an attempt to close gaps in the legal basis also for the other parts of the European Financing Mechanism and for the EU Economic Government.
Art. 136 par. 3 s. 1 TFEU is important regarding the „Greece Support“ and the EFSM, which have been built by means of EU regulations, just in case that art. 122 TFEU might not have been sufficient as a legal basis for those regulations. The EFSF and the ESM have been built by international treaties within the scope of „enhanced cooperation“. This means intergouvernemental treaties between EU member countries, but outside the scope of the EU law, for which organs of the EU are lent to cooperate within the scope of such treaties. For the EFSF and the ESM, the EU organs EU Commission, ECB, ECJ, and (for the EFSF) Eurogroup Working Group are lent to the mechanisms.
The „enhanced cooperation“ is governed by art. 20 TEU and art. 329 TFEU, which would have required the prior consent of the EU Parliament before creating EFSF and ESM. Art. 136 par. 3 s. 1 TFEU also is a trial to fix the problem regarding the non-compliance to art. 329 TFEU.
So art. 136 par. 3 TFEU is connected to all 4 mechanisms („Greece Support“, EFSM, EFSF, and ESM) of the European Financing Mechanism, not only to the ESM.
The EU has only the powers, which have been conferred to it (principle of conferral, art. 5 TEU). But the tightening of the Stability and Growth Pact has been created via EU regulations without any prior change of art. 126 TFEU, the Imbalance Procedure has been made via EU regulations without any prior change of art. 121 TFEU to allow sanctions to it, and the Budgetary Surveillance has been made without any prior change of the TFEU prescriptions regarding the EU subventions and without the changes, that would have been needed for any intervention of the EU Commission into the draft national and regional budgets of the countries of the eurozone.
No. 18 and 19 of the report „Strengthening Economic Governance in the EU“ of the Task Force of the 21.10.2010 confirm, that art. 136 par. 3 TFEU has also been made as a legal basis for the expansion of the sanctions of the Stability and Growth Pact. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/117326.pdf
The study „Funktionsfähigkeit und Stabilität des Euro-Raumes“ of the Austrian WIFO institute has been published in May 2010 and been made for the EU Commission. It informs, that art. 136 par. 3 TFEU shall be the legal basis for an Economic Government of the EU. http://karl.aiginger.wifo.ac.at/fileadmin/files_aiginger/publications/2010/eurostabilitaet.pdf
The ideas in that study has been like a blueprint for the tightened Stability and Growth Pact and for the creation of the Imbalance Procedure and for the Budgetary Surveillance. The study had been commissioned by the EU Regional Commmissioner Johannes Hahn.
The Fiscal Compact has been created as an attempt to give an additional legal basis (in addition to the carde blanche one of art. 136 par. 3 TFEU) for the regulations of the EU Economic Government (art. 3, 4, 5 par. 1, and 7 Fiscal Compact for the tightened Stability and Growth Pact, art. 9 Fiscal Compact for the Imbalance Procedure, and art. 5 par. 2 Fiscal Compact for the Budgetary Surveil- lance), and in order to get also many EU member countries without the currency euro under the EU Economic Government.
The conditions imposed on Greece have been imposed via the „Greece Support“ and the EFSF.
And the obligation of art. 136 par. 3 s. 2 TFEU of conditions for any financial aid within those mechanisms to be strict as in the practice of the IMF has the sense to put through the nearly total disregard of human rights to achieve the reduction of the social state to a minimum and to achieve privatization without precedent – both in order to a achieve a maximum of means for the financial stability of the financial sector.
The mechanisms of the European Financing Mechanism have the following limits:
-“Greece Support“ billion
-EFSM IMF) -EFSF
with 110.- billion € (loans 80.- billion € by states of the eurozone, 30.-
€ by the IMF
with 90.- billion € (loans 60.- billion € by the EU, 30.- billion € by the
with 779.78314 billion € (guarantees by the states of the eurozone) plus 220.- billion € by IMF
with 700.- billion € (capital guarantees, at first payable 80.- €)
The populations of the states of the eurozone would never have tolerated these huge figures in addition to the official bank preserving mechanisms without the deliberate deception at their cost in the form of hiding the additional bank safeguarding mechanisms behind a pretended „euro safeguarding“ or safeguarding of the „stability of the euro area as a whole“.
One might qualify, if one wants to see it that way, the use of the stability of the currency euro as a pretext to redirect hundreds of billions more of tax payer money for the stability of the financial sector, as betrayal – of quantitative size without precedent. But one thing is sure: Neither any of those mechanisms nor the use of the state budget for bank safeguarding have ever been necessary (section VI. of this submission).
III.3 The role of the „too big to fail“ hypothesis
The radical willingness to give thousands of billions of euros to obvious and to camouflaged bank preserving mechanisms does not only come from greedy lobbyism, but also from the idea, that „systemically important“ banks had to be safeguarded, the so-called „too big to fail“ theory.
In its paper „Are banks too big to fail or too big to save? International evidence from equity prices and CDS spreads“ the World Bank supports that ideology as such, but also warns, that some banks are so big, that their rescue would exceed the financial ressources of their respective seat country. www.ebs.edu/fileadmin/redakteur/funkt.dept.economics/Colloquium…
The World Bank regards banks with debts between the 1.5 fold and the 2.7 fold of the GDP of their country as „too big to fail“ and banks with debts of more than the 2.7 fold of the GDP as „too big to save“. For „too big to save“ banks, the World Bank recommends to put through either their deliberate shrinking or their deconcentration.
That the EU mechanisms even do not take into account the existence of „too big to save“ is only logical in view of the other aim, particularly via the state insolvency procedure of the ESM, to privatize the actual control of the sovereign institutions of the states of the eurozone.
But also the World Bank ignores the fact, that the complete „too big to fail“ hypothesis is untenable, because every bank is replacable as a result of the hitherto way of giral money creation virtually out of nothing, since banks can provenly create giral money out of nothing by granting loans in much higher figures, than their equity is. See section VI. of this submission.
III.4 Examples for the bank safeguarding regarding Greece
The advisory opinion „Überschuldung und Staatsinsolvenz in der Europäischen Union“ (“over- indebtedness and state insolvency in the European Union“) of the scientific advisory board of the German Economic Ministry informs in its section „2.2.4 Pauschaler Bailout der Anleger“ at p. 11+12 informs, that Greece has been indebted in the end of 2009 to banks in other countries of the eurozone with 82.- billion €, among them with 31.- billion € to French banks and with 23.- billion € to German banks. The advisory opinion informs, that without the help package, Greece would have needed to reduce its foreign debts, which would have questioned the survival of several banks in Europe.
According section „2.1.1 Paket Griechenland“ at p. 3+4, 80 % of the 110.- billion € (so about 88.- billion €) have been used to pay old debts.
According to no. 34 at p. 24 of the memorandum of understanding of May 2010 (within the scope of the „Greece Support“), Greece has been obliged to spend 10.- billion € for a bank safeguarding mechanism at the Greek level.
According to the article „Health Insurance a Victim of Austerity in Greece“ by Greek Reporter of
the 24.04.2014, the Greek Health Minister has estimated the number of people in Greece without health insurance between 1.9 and 2.4 million people (estimated by charities as about 3 million people), and that further 700 million € would be sufficient to cover their unmet health care – but that Greece has up to 50 billion € for bank safeguarding. http://greece.greekreporter.com/2014/04/24/health-insurance-greek-austerity-victim/
The article „There is Money !! – But not for the uninsured“ by the Greek Independent News
of the 07.03.2014 also mentions the estimation of 700 million € needed for the uninsured people and contrasts that figure to guarantees given by Greece in December 2013 of 3,609,600,000.- € for the Alpha Bank and of 4,280,000,000.- € for the Eurobank/Ergasias. http://greekindependentnews.net/2014/04/there-is-money-but-not-for-the-uninsured/
IV. Pretext for state insolvency procedure and privatization of services of general interest
One of the most important motives to repudiate an earlier debt reduction for Greece at the standard of the human rights, has been the abuse of the Greek debt situation as a pretext for the creation of the ESM with its state insolvency procedure for the countries of the eurozone.
Within the scope of the state insolvency procedure, inhuman conditions are connected rather to partly debt relief than to new loans, but the effect on the population is the same. So with the state insolvency procedure
even debts, which have originally legitimate at the time, when they have been incurred, become illegitimate and odious, when they are used in the state insolvency procedure to give to an unelected assembly of private creditors the de-facto power over the large parts of the executive and legislative decisions in the respective debtor country, so that the state loses the control similar to, how Prof. Dr. Voßkuhle has described it in his thesis no. 12 for the „guarantueeing state“ (section IV.2 of this submission).
The state insolvency procedure and the abuse of Greece as a pretext for the introduction of its ESM version is odious measured at the standard of the Tegucigalpa Declaration, because the assembly of the private creditors, which decides on any partly debt relief, is unelected, and conditions are imposed, i. a., by creditor banks with support by the IMF.
It is odious measured at the standard of the Canadian Ecumenical Jubilee Initiative, because it does, because of the strictness prescribed in art. 3 ESM Treaty and in art. 136 par. 3 s. 2 TFEU, not respect, which amount of the debts cannot be repaid without harming the population, including if it endangers the health or the life.
The debts treated in the state insolvency procedure are illegitimate examined at the AFRODAD standard, because in the course of that procedure „inappropriate structural adjustment conditions“ are connected to their partly relief.
They are illegitimate from the perspective of the Jubilee USA Network standard, because their partly relief
is decided for ideological and political reasons rather than to promote development.
They are illegitimate measured at the Jubilee South standard, because they are turned in the state insolvency procedure into „a tool of domination that ensures easy access by creditor nations and institutions to the resources of the South“.
Regarded from the standard by Joseph Hanlon, the debts are become illegitimate by the state insolvency procedure, which connects their partly relief to unacceptable conditions (policy conditions in violation of basic rights, which normally are the highest national laws) and inappropriate conditions (partly debt relief linked to unsuitable policies).
Measured at the standard of the New Economic Foundation, the state insolvency procedure makes the debts illegal (because of the de-facto transfer of the power in the country to the unelected assembly of private creditors),odious (because the sell-off of the public utilities and the sovereign institutions to private firms is against the population and with the full knowledge of the private creditors imposing that), onerous (because of unreasonable conditions), and other- wise illegitimate (because the sale of the sovereign institutions to be imposed by the assembly of the private creditors deprives the respective debtors state of its ability to fulfill its human rights obligations).
The odious and illegitimate behaviour to abuse Greece as a pretext for the creation of such a system requires a debt reduction by the damage, which has been caused by the postponing of a normal fair debt reduction at the standard of the human rights. That could be measured by an the figure of interests, which Greece has paid calculated on that part of its debt, which has still been too high because of the postponing of a sufficient debt relief.
That Greece itself is intended to become the showpiece of the ESM with its unelected private creditor assmbly and with the sell-off of the public utilities and of the sovereign institutions, requires a tougher answer. Greece itself needs to decide on its debt reduction, with absolute transparency strictly at the standard of the human rights, and sorting out all odious and illegitimate debts. It must be made abso- luteley transparent, how the odious and illegitimate part of the debts are identified and calculated, and which of the figures is estimated. The same transparency has to apply to the expenditures for health, nutrition, and housing of the population, because any normal compassionate creditor will accept a figure of debt reduction needed to end the humanitarian crisis in Greece. And also the fair compromise between the other human rights of the population and of the creditors, with respecting the core elements of the human rights and protecting vulnerable groups of the population and of the creditors has to be done absolutely transparent.
IV.2 State insolvency for sovereign power into private hands
One of the most important motives to repudiate an earlier debt reduction for Greece at the standard of the human rights, has been the abuse of the Greek debt situation as a pretext for the creation of the ESM with its state insolvency procedure for the countries of the eurozone.
The main interest in the privatization of sovereign institutions is to provide corporations with sovereign power, and to make the states dependent on them for the execution of their own sovereign powers.
The privatization of sovereign institutions deprives the respective country of its means to execute the respective sovereign functions with its own employees and officers, and makes it instead dependent on commissioning private corporations with those tasks. A corporation, which, e. g., runs the army, the police, or the highest court of a state, gets a huge de-facto power, to put through its own will in relation of its elected government and parliament. Countries would even not be able to defend themselves or to keep up their inner security without the good will of the corporations which they have entrusted with those tasks. They would be degraded to de-facto facades. Even sovereign services would be made a business, which the population has to pay fees and not only taxes for.
A further big interest in the privatization of sovereign institutions of the debtor countries is to get more money back, because the more the debtor state sales, the more money can be distributed among the creditors.
Every sovereign institution, however, can only be sold once. So the interest in shifting sovereign power de-facto into private hands is the stronger one.
A state, which commissions private corporations with many of its sovereign tasks, is called guarantueeing state“ (translated from the German term „Gewährleistungsstaat“). This means a new type of state, which does not do most of its sovereign tasks any more, but just makes sure, that someone else does it. In a „guaranteeing state“, the role of the state is mainly to commission private firms with its sovereign tasks, as profitable business for them and to provide them with sovereign power for the respective tasks, and not any more mainly for the benefit of its citizens. The power in a „guaranteeing state“ is much more on the side of the private actors commissioned with sovereign tasks than at the level of the government, of the parliament, or the citizens. It would is much more of a corporate aristocracy than of a democracy.
Also Prof. Dr. Andreas Voßkuhle, who has, at the conference of the VVDStRL („Vereinigung deutscher Staatsrechtslehrer“, a NGO of German speaking jura professors with a focus on state law) at St. Gallen in October 2002, presented a three columns model of a so-called „Gewährleistungsstaat“ („guaranteeing state“), in which large parts of sovereign tasks of the state are commissioned to private firms, admits in thesis 12 of his speech, that the functional privatization leads to a significant loss of control of the state („..führt zu einem deutlichen Verlust an Direktionskraft..“), which could even not be prevented by creating new prescriptions for that purpose („..durch neue dogamtische Konstruktionen nur begrenzt aufgefangen werden kann…“). (VVDStRL, Tagungsband 62, De Gruyter Rechtswissenschaften Verlags GmbH, page 331). In thesis 12 (p. 331) of his speech, he has stated, that the German Basic law is fundamentally not open („..schon im Ansatz… nicht eingerichtet…“) for a mixture between private actors and sovereign power („ein ‘Mixtum von Staat und Gesellschaft’ “). That probably applies to most countries of the world because of democracy and the rule of the law, even though the privatization of sovereign power is not in every constitution so explicitely prohibited as in art. 33 par. 4 of the German Basic Law and in art. 153 of the Polish constitution.
In Germany, a change of the type of state to the „guarantueeing state“ is even anti-constitutional, because it collides with several parts of the free democratical order of the Basic Law (art. 18 Basic Law; basic principle 2 of the SRP prohibition judgement of the German Constitutional Court BVerfGE 2,1; art. 4 par. 2 of the law on the executive authority for the protection of the German constitutionial order (BVerfSchG)). The loss of control of the state in the „guarantueeing state“ undermines the indirect control of the people via elections over the organs of the state, undermines de-facto the obligation of the state organs to the law, undermines the responsiblity of the government to the parliament, undermines the independence of the courts, undermines the exclusion of any violent or arbitrary rule, and undermines the human rights of the Basic Law.
The Lisbon Treaty has inserted into the EU primary law the obligation of the EU member states to functionally privatize (to commission private firms with those tasks) the public utilities („services of general economical interest“, art. 14 TFEU) (such as public transport, public water and energy supply, etc.) and the sovereign tasks („noneconomical services of general interest“, art. 2 of protocol 26 to TEU and TFEU).
After the rejection by the Lisbon Judgement of the 30.06.2009 of the German Constitutional Court, of the functional privatization of the sovereign institutions, which is prescribed by art. 2 of protocol 26 (see section IV.3 of this submission), one needed a further legal basis and a new pretext to put that privatization through.
The state insolvency procedure of the ESM is the key mechanism to put through the sale off of the sovereign institutions of the member states of the eurozone.
It would not have been created, if a sufficient debt reduction at the standard of the human rights had been done before. And it would bring about less privatization, if such a fair standard would be applied within the state insolvency procedure.
These are strong incentives to deny any sufficient debt reduction to the states of the eurozone, until most of their sovereign institutions will have been privatized. The obligation to make conditions with a strictness as in the „practice“ of the IMF needs also to be regarded from that motive.
In addition to that, a state insolvency procedure is a means of the legalization (within the scope of the ESM law) of the imposition of conditions with a rank of international public law by private creditors on states, which before has only taken place without any legal basis via the Vienna Initiative of the IMF. And also the Vienna Initiative is also included in the ESM.
In addition to that, the IMF has already lobbied in the years 2002 and 2003 for the creation of a world-wide state insolvency procedure (see e. g. the paper „A New Approach to Sovereign Debt Restructuring“ from April 2002 by the then IMF Vice Managing Director Anne Krueger).
The ESM is a big step to that direction.
And the current hurry into a universal state insolvency procedure also goes into that direction, as will be shown in section IV.5 of this submission – quite the opposite of a fair debt sustainability analysis at the standard of the universal human rights, for which, e. g. Prof. Dr. Cephas Lumina had advocated a the creation of a state insolvency procedure as such (no. 22 of the report by Prof. Dr. Cephas Lumina of the of the 12.08.2009, file number A/64/289).
The privatization of the sovereign tasks of the state is included in the so-called „Anglo-Saxon Mission“, a strategical concept existing since 1970ies, according to the testimony of an anonymous freemazon from Great Britain, which is being pursued, i. a., by financial elitist circles in the City of London. Also in their concept, the start of the manipulated financial crisis takes place before the large-scale sell-off of the sovereign institutions. And their approach includes the taking over of the de-facto power in the Western countries by private actors during a fabricated safety political crisis and after the privatization of sufficient large parts of the police and the armies, while leaving in place governments and parliaments to keep up a facade of democracy. http://www.projectcamelot.org/lang/en/anglo_saxon_mission_interview_transcript_en.html
IV.3. The ongoing abuse of the EU law to enforce an unprecedented privatization of the social and of the sovereign institutions of its member states
The Lisbon Treaty is a treaty, which has changed the two fundamental treaties of the EU, namely, the Treaty on the European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU, formerly called „Treaty on the European Community“ (TEC)) and many of the protocols and declarations annexed to those treaties.
The Lisbon Treaty has inserted, inter alia, the current art. 14 TFEU and protcol no. 26.
Art. 14 TFEU obliges the EU member states to commission private firms with the „services of general economic interest“. Art. 2 of protocol 26 to TEU and TFEU obliges the EU member states to commisstion private firms with the „non-economic services of general interest“.
„General interest“ means „public task“, „economic“ means more financed by prices, and „non- economic“ means more financed by tax revenues. Art. 14 TFEU means the functional privatization of the not sovereign parts of the public tasks, such as public transport, water, energy, or public housing. Art. 2 of protocol 26 means the functional privatization of nearly all sovereign parts of the state, such as the administration, the police, the army, nearly all of the courts. Art. 2 of protocol 26 goes significantly further than Prof. Dr. Voßkuhle’s ideas in his speech before the VVDStRL (see section IV.2 of this legal submission).
The commissioning of private firms with sovereign tasks is called „functional privatization“. That means, that the respective sovereign task remains public, but that the state does not fulfill it any more with its own officers and employees, but to commission private enterprizes, each for a certain time, with the respective task. The bigger the scale of such functional privatization of sovereign tasks, the more the government and the parliament lose their democratical oversight, the more develops a kind of de-facto corporate aristrocacy with a democratical facade. The implementation of art. 2 of protocol 26 means nothing less than a revolutio- nary change of the type of state in all EU member states, away from the rule of the law.
I have filed a constitutional complaint at the 24.09.2008 (file number 2 BvR 1958/08) against the law consenting to the Lisbon Treaty, inter alia, in order to prevent that large-scale functional privatization. You find the then complaint at the link: https://sites.google.com/buergerrechtemenschenrechte/lissabon-vertrag/verfassungsbeschwerde/2- bvr-1958-08
The consent to the Lisbon Treaty has been allowed by the German Constitutional Court in its Lisbon Judgement of the 30.06.2009 only with many preconditions, among them the protection of the state monopoly on the use of force (no. 249, 251, and 252 Lisbon Judgement), meaning not to functionally privatize the sovereign tasks of the state. http://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/DE/2009/06/es20090630_2bve000 208.html
Officially, the Lisbon judgement has been on the complaints of other then plaintiffs such as Dr. Gauweiler, the Left Party, Prof. Dr. Buchner, and Prof. Dr. Kerber. But those plaintiffs have not complained against the prescriptions for the functional privatization. The Lisbon judgement has picked up in a very unconventional and intransparent step and apart from the spirit of art. 93a BVerfGG, my then objections and decided them in the judgement on their complaints.
After the Lisbon judgement, the Constitutional Court has decided at the 27.08.2009, not to accept my complaint of the 24.09.2008 – even though it nevertheless had already decided on all of its content within the Lisbon judgement of the 30.06.2009, except for the objections against the use of the military in the interior (see art. 222 TFEU).
The elitist circles have been quite upset and confused at that time, because they and the general public did not know, where those parts of the Lisbon Judgement, which have no connection to Dr. Gauweiler’s complaint, have come from.
Even though Lisbon judgement is formally only binding for Germany, it has practically prevented the nearly total functional privatization of the sovereign institutions in many, if not most, EU member countries.
So the lobbying for the multi-billion € functional privatization of the sovereign institutions is going on with particularly the state insolvency procedure of the ESM as one main instrument to reach that.
That also the EU Commission still tries to put through the functional privatization of sovereign tasks of the EU member states, is also shown in no. 19 of its negotiation mandate for a new trade agreement between the EU and the USA named „Transatlantical Union“ or „TTIP“, where the negotation mandate aims to open the market also transatlantically regarding the privatization obligations, which the EU has, from the perspective of the EU law, according to its protocol 26 (so regarding the public utilities and the sovereign public services of the EU member states). http://www.power-shift.de/wordpress/wp-content/uploads/2013/06/EU-TTIP-Mandate-from-bfmtv- June17-2013.pdf
In sections XI.1.7, XI.1.8, and XI.1.9 of the then complaint, I have shown the unconstitutionality of the functional privatization of sovereign tasks (because of violations particularly of the basic right to function reservation (art. 33 par. 4 Basic Law), of the basic right to vote (art. 38 Basic Law), of democracy (art. 20 par. 1+2 Basic Law), and of the rule of the law (art. 1 par. 2+3 Basic Law, art. 20 par. 2+3 Basic Law).
The TISA Treaty, which is being negotiated between the EU and about 23 further countries, is going
to complement the privatization of public utilities and sovereign institutions with the standstill clause and with the ratchet clause of the TISA Treaty (see p. 13+20 of the study „TiSA contra öffentliche Dienste“ by Scott Sinclair, Canadian Centre for Policy Alternatives, and by Hadrian Mertins-Kirkwood, Institute of Political Economy, Carleton University, which has been made for the Public Services International (PSI), an international alliance of trade unions). http://www.world-psi.org/sites/default/files/documents/research/de_tisapaper_final_web.pdf
The standstill clause is going to prescribe, that all services, which have ever been privatized, may never be done by the state itself anymore; that clause shall prohibit the nationalization of privatized public utilities and sovereign institutions as well as the creation of new units of public utilities and soveign institutions in the hands of the state.
The ratchet clause, in addition to that, shall prescribe, that all new public tasks will only be allowed to be done by private firms.
IV.4 The ESM and its State Insolvency Procedure
IV.4.1 The ESM and its debt sustainability analysis
A loan by the ESM depends on a prior rigorous debt sustainability analysis (art. 13 ESM Treaty). A state, whose debts are found by the ESM to be not sustainable, is put into the state insolvency procedure of the ESM.
So it is crucial, which definition of „debt sustainability“ is meant. The EU and the IMF have different focuses on that term. The ESM Treaty is an international treaty of the states with the currency euro. All of them are EU meber states, but the ESM Treaty is outside the EU law.
In the EU law, protocol 12 to the treaties (TEU and TFEU) of the EU, measures the debt sustainability (for purposes of the Stability and Growth Pact) at the budgets of the national, the regional, and the communal level of the state, and of the public social insurance. As a result, using the EU definition of debt sustainability
for the ESM leads to the use not only of the savings of the national, regional, and communal budgets, but also of the public social insurance to pay the creditors, resulting to big cuts into the benefits of the social insurance.
As Prof. Dr. Cephas Lumina has explained in no. 39 of his report on Greece of the 07.03.2014 (file number A/HRC/25/50/Add.1), the IMF definition of debt sustainability focuses on preeminently securing the external debt service, respecting the human rights claims of the population of the debtor country only as far as the external debt service leaves space for that.
Since the ESM is an international organization of its own involving organs of the EU and involving the IMF, the debt sustainability is to be interpreted according to the EU definition and to the IMF definition of that term.
It must have been obvious in the course of the creation of the ESM, that these two definitions would govern the application of the ESM.
Greece has, up to now, got its conditions via the „Greece Support“ and via the EFSF, the latter of which is the predecessor mechanism of the ESM. And art. 6 of EU regulation 472 (2013) (in the draft version art. 5 of draft EU regulation 2011/385 (COD)) complements the EFSF law with the obligation to do a rigorous debt sustainability analysis also, before a loan by the EFSF or the EFSM is given.
Even though the EFSF Framework Treaty contains, in contrast to the ESM, no state insolvency procedure, Greece has been forced even before the ESM Treaty to collective action clauses and to a
blocked account for the external debt service.
IV.4.2. The connection between art. 12 par. 3 ESM Treaty, the collective action clauses and the changes to the laws on the public debt managment
According to art. 12 par. 3 ESM Treaty, all states of the eurozone have to attach collective action clauses to all new bonds they emit since the 01.01.2013. The detailed prescriptions for the state insolvency procedure have not been included into the ESM Treaty itself, but into the simple national laws, which is shown at the example of Germany by the new art. 4a to 4k of the law on the public debt management (Bundeschulden-wesengesetz, BSchuWG). These have been inserted by the „Gesetz zur Änderung des Bundesschulden-wesengesetzes“ (law on the modification of the law on the public debt management, file number 17/9049), which has been explicitely an accompanying law for Gemany to the ESM Treaty.
link on the law on the change of the BSchuwG
Also art. 2, art. 11 par. 4 lit. b, and art. 29 par. 2 of the Cypriot law on the public debt management show the connection between collective action clauses and state insolvency procedure. http://www.mof.gov.cy/mof/pdmo/pdmo.nsf/All/C9D4B993B615CE0DC2257AF7002F61FA/ $file/PDML%20translation%20in%20English%20FINAL%2015%201%202013.pdf
As the statement of the Eurogroup of the 28.11.2010 has demanded, the collective action clauses have to be identical for all countries of the eurozone. Also the section „Problem und Ziel“ („problem and aim“) of the explanation of file number 17/9049 confirms:
„Der am 2. Februar 2012 von allen Staaten des Euro-Währungsgebiets unterzeichnete Vertrag zur Einrich- tung des Europäischen Stabilitätsmechanismus verpflichtet nunmehr die Staaten des Euroraumes zur Einfüh- rung solcher Umschuldungsklauseln ab dem 1. Januar 2013, deren rechtliche Wirkungen in allen Rechtsord- nungen des Euro-Währungsgebiets jeweils gleich zu sein hat.“
(„The Treaty on the establishment of the European Stability Mechanism, which, has been sign by all states of the eurozone at February, the 2nd of 2012, now obliges the countries of the eurozone to introduce such clauses on the debt resceduling at January, the 1st of 2013, whose legal effect has to be the same in all legal orders in the eurozone.“ )
And the explanations of file number 17/9049 say:
„Das Bundesschuldenwesengesetz übernimmt somit die Funktion eines Leitbildes, das die wesentlichen Inhalte der unter den Eurozonenstaaten abgestimmten Umschuldungsklauseln nachzeichnet.“
(„So the law on the public debt management gets the function of a model, which reproduces the essential contents of the clauses on the debt resceduling, which have agreed to by the countries of the eurozone.“)
So the art. 4a – 4k of the law on the public debt management contain the essential contents of the collective action clauses, which all countries of the eurozone have obliged themselves to.
For Germany, a state insolvency procedure would be initiated after an application by the German government or by creditors representing at least 10 % of the nominal value of the outstanding debt (art. 4e of the law on the public debt management).
The combination of art. 12 par. 3 ESM Treaty, of the collective action clauses, and of the new detailed prescriptions on the state insolvency procedure in the national law have the sense to prevent any sovereignly managed state bankruptcy within the eurozone.
That a state insolvency procedure is meant, is shown by the fact that the responsible court at Frankfurt/Main would, after an incontestable decision (art. 4e par. 1 s. 4+6 BSchuwG) to start the procedure, convene the assembly of the private creditors (art. 4e par. 1 s. 4+7 BSchuWG), by the measuring of the voting rights of the creditors in that assembly at their outstanding claims (art. 4c par. 1 BSchuWG), and by the fact that the claims would have to be registered to the state insolvency table (art. 4c par. 4 BSchuWG).
According to art. 4b BSchuWG, the assembly of the private creditors could decide on the change of the terms of the bonds, such as (art. 4b par. 1 BSchuwG), e. g., on the amount and the maturity of the principal claim and of the interests (art. 4b par. 1 no. 1+2 BSchuwG), on the currency and the place for the repayment (art. 4b par. 1 no. 3 BSchuwG), on other changes to the repayment conditions (art. 4b par. 1 no. 4 BSchuwG), on the rank of the claims among each other (art. 4b par. 1 no. 7 BSchuwG), on the conditions for a premature cancellation of bonds (art. 4b par. 1 no. 6 BSchuwG), on the change of the court of jurisdiction into any other country in the world (art. 4b par. 1 no. 9 BSchuwG), and on the question, under the law of which nation of the world the bonds are (art. 4b par. 1 par. 8 BSchuwG).
These far-reaching powers of the assembly of the creditors within the state insolvency procedure show, how much power the private creditors have within the state insolvency procedure, which enables them to impose on the respective insolvent debtor state political conditions like the Troika in return for debt reliefs.
And the possibility to shift the court of jurisdiction and also the applicable law to any place on the planet, shows, that already the creation of a global state insolvency procedure has been expected.
States of the eurozone with solvency problems, which request for financial aid by the ESM, undergo a rigo- rous debt sustainability analysis (art. 13 ESM Treaty) by the Troika, before any payment by the ESM takes place. As shown in section IV.4.1 of this submission, this means (according to the EU definition of debt sustainability) to use not only of the savings of the national, regional, and communal budgets, but also of the public social insurance to pay the creditors, and (according to the IMF definition of debt sustainability) the measuring of the debt sustainability on preeminently securing the external debt service.
Only states, whose debts are regarded as sustainable, get money from the ESM. States of the eurozone, whose debts are not regarded as sustainable by the Troika, are put them into the state insolvency procedure after their own application or the application of 10 % of their private creditors.
And art. 3 ESM Treaty as well as art. 136 par. 3 TFEU prescribes to impose strict conditions (oriented on the strictness of the practice of the IMF, see the conclusions of the Ecofin Council of the 09.05.2010, file number SN 2564/1/10) – no matter if the conditions are imposed by the Troika for a loan to the debtor country, or if they are imposed by the assembly of the private creditors for a partial debt relief.
IV.4.3 The statement by the Eurogroup of the 28.11.2010
That art. 12 par. 3 ESM Treaty in connection with the collective action clauses and the changes to the laws on the public debt management mean to establish a state insolvency procedure, is also shown by the following excerpt of the statement of the Eurogroup (the discussion group of the Financial Ministers of the countries of the eurozone) of the 28.11.2010: http://www.eurozone.europa.eu/newsroom/news/2010/11/statement-eurogroup-28-11-2010/
„Throughout the current crisis, euro area Member States have demonstrated their determination to take decisive and coordinated action to safeguard financial stability in the euro area as a whole, if needed and return growth to a sustainable path.
In particular, the European Financial Stability Facility (EFSF) has been set up to provide for swift and
effective liquidity assistance, together with the European Financial Stabilisation Mechanism (EFSM)
and the International Monetary Fund, and on the basis of stringent programmes of economic and fiscal
policy adjustments to be implemented by the affected Member State and ensuring debt sustainability.
On 28 – 29 October the European Council agreed on the need to set up a permanent crisis mechanism to safeguard the financial stability of the euro area as a whole.
Eurogroup Ministers agreed that this European Stability Mechanism (ESM) will be based on the European Financial Stability Facility capable of providing financial assistance packages to euro area Member States under strict conditionality functioning according to the rules of the current EFSF. The ESM will complement the new framework of reinforced economic governance, aiming at an effective and rigorous economic surveillance, which will focus on prevention and will substantially reduce the probability of a crisis arising in the future.
Rules will be adapted to provide for a case by case participation of private sector creditors, fully consistent with IMF policies. In all cases, in order to protect taxpayers’ money, and to send a clear signal to private creditors that their claims are subordinated to those of the official sector, an ESM loan will enjoy preferred creditor status, junior only to the IMF loan.
Assistance provided to a euro area Member State will be based on a stringent programme of economic and fiscal adjustment and on a rigorous debt sustainability analysis conducted by the European Commission and the IMF, in liaison with the ECB.
On this basis, the Eurogroup Ministers will take a unanimous decision on providing assistance.
For countries considered solvent, on the basis of the debt sustainability analysis conducted by the Commission and the IMF, in liaison with the ECB, the private sector creditors would be encouraged to
maintain their exposure according to international rules and fully in line with the IMF practices. In the
unexpected event that a country would appear to be insolvent , the Member State has to negotiate a comprehensive restructuring plan with its private sector creditors, in line with IMF practices with a view
to restoring debt sustainability. If debt sustainability can be reached through these measures, the ESM may provide liquidity assistance.
In order to facilitate this process, standardized and identical collective action clauses (CACs) will be
included, in such a way as to preserve market liquidity, in the terms and conditions of all new euro area government bonds starting in June 2013. Those CACs would be consistent with those common under UK and US law after the G10 report on CACs, including aggregation clauses allowing all debt
securities issued by a Member State to be considered together in negotiations. This would enable the
creditors to pass a qualified majority decision agreeing a legally binding change to the terms of payment (standstill, extension of the maturity, interest-rate cut and/or haircut) in the event that the debtor is unable to pay.“
Also at the Eurogroup session at the 28.11.2010, the conditions of the mechanisms of the European Financing Mechanism have been wanted by the Financial Ministers to be „stringent“. They admit, that EFSM and EFSF have been set up „to safeguard the financial stability of the euro area as a whole“ (for the stability of the financial sector in the countries of the eurozone, see section III.2 of this submission). And they say explicitely, that also the ESM (the „permanent crisis mechanism“) has the aim „to safeguard the financial stability of the euro area as a whole“. For the ESM, they have demanded „strict conditionality“ and „rigorous economic surveillance“.
The statement of the 28.11.2010 already shows, that the „rigorous debt sustainability analysis“ by ECB, IMF, and EU Commission has been wanted to be the basis for the decision, if the respective debtor country is regarded as solvent. Those countries considered to „to be insolvent“, they have explicitely wanted to be obliged to be be legally bound „to negotiate a comprehensive restructuring plan with its private sector creditors, in line with IMF practices with a view to restoring debt sustainability.“ That means the assembly of the private creditors within the the state insolvency procedure, which can give the debtor state debt reductions for fulfilling political conditions made by the private creditors. The expression „in line with IMF practices“ in that context shows, that the assembly of the private creditors has been expected to do that as strict as the IMF usually. And the Financial Ministers have already clarified at the 28.11.2010, that the countries regarded as insolvent, would then get „liquidity assistance“ by the ESM only after, they would have reached „debt sustainability“ „through these measures“ (through the reduction of their debts granted by the assembly of the private creditors for fulfilling the conditons imposed by the private creditors).
And the Financial Ministers have already at the 28.11.2010 wanted „standardized and identical collective action clauses (CACs)“ to be the legal basis to „facilitate this process“ (the state insolvency mechanism of the ESM). And today, art. 12 par. 3 ESM Treaty obliges the countries, which have the currency euro to include into all bonds they emit since the 01.01.2013 those collective action clauses.
IV.4.4 The Conclusions of the Summit of the European Council of the 24./25.03.2011
Also the conclusions of the Summit of the European Council of the 24./25.03.2011, which have been published at the 20.04.2011 (file numbers EUCO 10/1/11 REV 1 and CO EUR 6 CONCL 3) prove, that the ESM contains an insolvency procedure, and give decisive more pieces of information on it.
At page 19, you find under the headline „d. Reinforce financial stability“, the sentence „A strong financial sector is key for the overall stability of the euro area..“
That proves, that also in the EU law, „financial stability“ means the stability of the financial sector. Page 22 informs, that „the function of the ESM will be to mobilize funding and provide financial assistance, under strict conditionality, to the benefit of euro-area Member States, which are experiencing or are threatened by severe financing problems, in order to safeguard the financial stability of the euro area as a whole“.
That shows, that the aim also of the ESM is to protect the stability of the financial sector.
Page 27 shows, that financial aid by the ESM shall be dependent on „the existence of a risk to the financial stability of the euro are as a whole“ (meaning the stability of the financial sector) and of „a rigorous analysis of the public debt of the Member State concerned“. You find both today in art. 13 par. 1 ESM Treaty.
Page 29 informs:
„An adequate and proportionate form of private-sector involvement will be expected on a case by case basis where financial assistance is received by the beneficiary State. The nature and extent of this involvement will be determined on a case-by-case basis and will depend on the outcome of a debt sustainability analysis, in line with IMF practice6, and on potential implications for euro-area financial stability.“
This shows again the directness of the ESM to the „financial stability“ of the financial sector. The expression „in line with IMF practices“ shows, that the (rigorous) „debt sustainability analysis“ has been expected by the Prime Ministers to be done not only strict as in the „practice“ of the IMF, but footnote 6 explains the IMF approach to a debt sustainability analysis:
„In line with the IMF, debt is considered sustainable when a borrower is expected to be able to continue servicing its debts without an unrealistically large correction to its income and expenditure. This judgement determines the availability and the appropriate scale of financing.“
This proves the statement by Prof. Dr. Lumina (section IV.4.1 of this submission), that the view of the IMF on debt sustainability is narrowed on the debt repayment capability of the debtor state, but fails to take in view the ability of the debtor state to fulfill its human rights obligations to its own population. And it shows, that such a narrowed view has been the example for the view of the ESM on debt sustainability.
The quotation above from page 29 also shows, that the involvement of the private creditors within the ESM takes place also, if the debts of the state are found to be sustainable, so that it is not sent into the state insolvency procedure.
On page 30, it is explained further, what happens then:
„a)If, on the basis of a sustainability analysis, it is concluded that a macro-economic
adjustment programme can realistically restore the public debt to a sustainable path, the beneficiary Member State will take initiatives aimed at encouraging the main private investors to maintain their exposures (e.g. a “Vienna Initiative” approach). The Commission, the IMF, the ECB and the EBA will be closely involved in monitoring the implementation of such initiatives.“
As explained in section V.7.4 of this submission, the „Vienna Initiative“ is a concept, which gives the biggest private creditors the chance to impose political conditions on states in exchange for partly debt reliefs. And that is foreseen for the ESM even for those cases, when a state is not put into the state insolvency procedure.
That a state, whose debts are not regarded as sustainable in the „rigorous debt sustainability analysis“, would be sent into the state insolvency procedure, is shown by the following quotation from page 30:
„(b) If, on the basis of a sustainability analysis, it is concluded that a macro-economic
programme cannot realistically restore the public debt to a sustainable path, the beneficiary Member State will be required to engage in active negotiations in good faith with its creditors to secure their direct involvement in restoring debt sustainability. The granting of the financial assistance will be contingent on the Member State having a credible plan and demonstrating sufficient commitment to ensure adequate and proportionate private sector involvement. Progress in the implementation of the plan will be monitored under the programme and will be taken into account in the decision on disbursements.“
This shows, that the ESM has been intended to give loans to insolvent states only after successful agreements between the state and its private creditors.
Page 31 informs, that the collective action clauses connected to the new bonds of the states of the eurozone have the objective „to facilitate agreement between the sovereign and its private-sector creditors in the context of private sector involvement“.
They have „an aggregation clause, enabling a super majority of bondholders across multiple bond issues“.
This shows, that the collective action clauses of the new bonds have the sense to enable and to enforce collective decision making by the private creditors (in the assembly of the private creditors within the state insolvency procedure of the ESM).
The following quotation from page 30 shows the overweigth of the private creditors in the state insolvency procedure:
„Fairness: the Member State will consult creditors on the design of any rescheduling or restructuring of public debt with a view to reaching negotiated solutions. Measures reducing the net present value of the debt will be considered only when other options are unlikely to deliver the expected results.“
That means, that in a state insolvency procedure any reduction of the „net present value of the debt“ are only considered as the last option (after other debt relieving measures like lowering interest rates, mildering repayment rates etc., and after austerity measures, tax hikes, and privatization including public utilities and sovereign institutions).
That is a very narrowed view on fairness with the creditors only, completely sidelining the fairness to the population of the debtor country.
And it proves, most importantly, that the ESM has the sense to prevent any sovereign management and any management at the standard of the human rights regarding state bankruptcies of countries of the eurozone.
Also „proportionality“ is demanded at page 30, but only „proportionate to its debt sustainability problem“ – referring to the narrowed view of the IMF and of the ESM on debt sustainability (see above in this section and section IV.4.1of this submission) and so completely sidelining any proportionality between the human rights of the creditors and the population of the respective debtor country.
IV.4.5 The view of the the BDI
The paper „Ein neuer Vertrag für den Euro – 12 Thesen aus einer industriellen Perspektive“ („a new treaty for the euro – 12 theses from an industrial perspective“ by the BDI of the 07.09.2011 has also demanded an ESM with a state insolvency procedure. http://www.bdi.eu/images_content/EuropaUndBruessel/Ein_neuer_Vertrag_fuer_den_Euro.pdf
The BDI is the biggest NGO of the industrialists in Germany. The industry is, besides banks and insurances, a big group of creditors of Germany. That paper did not yet use the term ESM, but „European Fiscal Fund“.
It demanded in its thesis no. 6, that states shall give securities for the loans they get. Thesis no. 7 has demanded a state insolvency procedure as a part of the new mechanism, and that a debt sustainability analysis would take regarding each credit single tranche of the mechanism. The BDI paper has even wanted a presumption of insolvency for states, which would need financial aid by the ESM for 3 years or longer.
The sense (from a BDI perspective) of the ESM and its state insolvency procedure to enforce farther-reaching and faster privatizations, becomes even clearer by the article „Deutsche Industrie fordert Zwangsvollstreckung für Schuldenstaaten“ („German industry demands execution against debtor states“) of the Deutschen Wirtschaftsnachrichten of the 18.08.2013. http://deutsche-wirtschafts-nachrichten.de/2013/08/18/deutsche-industrie-fordert- zwangsvollstreckung-fuer-schulden-staaten/
According to that article the CEO of the BDI, Mr. Markus Kerber, has proposed „his idea“ („seine Idee“), since privatizations in the states often were done only slowly, to transfer property of the states („nationales Staatsvermögen“) onto the ESM and so turn the ESM into a kind of treasury of the eurozone („Euro-Schatzamt“). Then, so Mr. Kerber’s suggestion, one could settle claims under private law with that property („schuldrechtliche Ansprüche dagegen verrechnen“). According to Mr. Kerber, there is national property („Staatsvermögen“) „in allen Not leidenden Staaten im dreistelligen Milliardenbereich“ („in all needy countries in the amount of three-digit billions“).
So he has lobbied for the privatization of national property of the countries of the eurozone worth three-digit billions of euros. How would one get to such high figures without including the privatization of also sensible social institutions and of sovereign institutions of the member states?
And the transfer of the national state property as a security would be to the ESM, not to single creditors. As a logical result, the settlement of the claims of the creditors would take within the ESM. And that could be either within the rigorous debt sustainability analysis in order to prevent the application of the state insolvency procedure on the respective state, or within the state insolvency procedure.
IV.4.6 How Greece will most probably get into the state insolvency procedure until July 2015
As the article „Vorposten der NATO – USA bestehen auf Verbleib Griechenlands im Euro“ informs, bank circles prognosticate, that Greece will apply for an ESM loan in June 2015, and that the CEO of the ESM, Mr. Klaus Regling is reported to already have recommended Greece to apply to the ESM for a 11.- billion € loan. And the article informs, that in July 2015 a new agreement shall start, which includes the statistical collection and aggregation of the Greek debts. That is obviously nothing else than the state insolvency procedure of the ESM ! ww.deutsche-wirtschafts-nachrichten.de/2015/05/17/vorposten-der-nato-usa-bestehen-auf-verbleib- griechenlands-im-euro/
And just in case, that the Greek government had the courage not refuse to apply for an ESM loan, there are other means. According to art. 40 ESM Treaty, the Council of Governors of the ESM (consisting of the Financial Ministers of the countries of the eurozone, which have ratified the ESM Treaty) can conclude, that financial claims of the EFSF can be transferred to the ESM.
If such a decision was taken, countries, which have received loans via the EFSF (such as Greece, Spain, and Portugal, e. g.), would be treated according to the ESM law – including rigorous debt sustainability analysis and, if the debts of the respective country were not regarded as sustainable, the state insolvency procedure.
If Greece will deliberately take a loan from the ESM, or if the existing EFSF claims against Greece will be transferred to the ESM, both will force Greece into the state insolvency procedure, and will lead to the sale of its public utilities and sovereign institutions.
And that, even though Greece could make normal loan agreements, for which the banks can create the money out of nothing, in much higher figures than the equity of the banks is, seriously limited only by the Basel criteria (sections VI.3+VI.5 of this submission). With loan contracts, one can, in contrast to state bonds, reach no speculatively high interest rates.
IV.4.7 The involvment of Germany in the concept of a state insolvency procedure
The Spiegel article „Bundesregierung entwickelt Verfahren für geordnete Staateninsolvenz“ („Federal Government develops procedure for orderly state insolvency“) of the 10.07.2010 informs, that experts of the German government have at that time worked on a concept for a state insolvency mechanism.
Their concept at that time has been called „Berliner Club“ and has meant the creation of new international authority, which the countries of the eurozone or of the G20 would become members of. In a first step, the financial claims of the private creditors should be reduced, and the rest be guaranteed by the „Berliner Club“. If that was not enough, then in a second step, a complete restructuring of the debts would take place under the control of one person or of a group of persons (like insolvency administrators) chosen by the „Berliner Club“. The „Berliner Club“ would be „entpolitisiert“ (independent of political control). The IMF would accompany the measures of that institution from the beginning on. And the „Berliner Club“ would not be an alternative to the „European rescue package“ („europäischen Rettungspaket“), but its further development.
The article „Spiegel: Regierung plant Insolvenzplan für Staaten“ of the Süddeutsche Zeitung of the 10.07.2010 has referred to the Spiegel article explained above and given further pieces of information.
According to that article the German Chancellor Dr. Angela Merkel has demanded the development of an orderly state insolvency procedure, and that the German government has been working on a plan for the insolvency of excessively indebted countries of the eurozone. She has, according to the article, said, that the implementation could be difficult, because for a change of the treaties of the EU, the consent of all member states is needed. The concept wanted to make insolvencies of states more similar to those of enterprizes and, under certain circumstances, transfer some powers to a kind of insolvency administrator.
The considerations of the German Chancellor regarding the creation of the state insolvency procedure for the countries of the eurozone have been based on, according to the article of the Süddeutsche Zeitung, works of the German Ministries of Finance and of Justice.
The Reuters article „Magazin: Insolvenzverfahren für Pleite-Staaten erarbeitet“ („magazine: insolvency procedure for bankrupt states developed“) of the 10.07.2010 refers to the Spiegel article and gives regarding the state insolvency the further information, that the German Financial Minister Dr. Wolfgang Schäuble has been striving for the creation of a state insolvency procedure since spring 2010.
Besides the state insolvency procedure, the Reuters article has informed, that the member states wanted a better coordination in economical policy and a sharper Budgetary Surveillance, and that the special working group of the Financial Ministers under the lead of Herman van Rompuy (the then President of the European Council) should come to an agreement until October 2010, which legal changes are necessary for that. http://de.reuters.com/article/economicsNews/idDEBEE66906S20100710
The „special working group“ is the „Task Force“ mentioned in section III.2 of this submission.
Instead of „Berliner Club“, the mechanism with the state insolvency procedure has been named „ESM“, and the state insolvency procedure of the ESM does not include the post of a single insolvency manager.
This section shows, that the German government has known, that a state insolvency procedure has been planned, and has been active in developing it. The German government has had an interest to put through the creation of the state insolvency procedure of the ESM.
IV.5. The global state insolvency procedure
The ESM for the eurozone needs to be regarded together with the world-wide state insolvency procedure in preparation. There are striking parallels. For the ESM, a state bankruptcy situation of Greece has been abused as a pretext, for Argentina a temporary problem of Argentina with some „vulture funds“ related to the so-called „Rufo clause“, which has expired at the 31.12.2014, and which had included the risk of a revival of large parts of the debts to its private creditors in the case of any preferential treatment of only parts of the private creditors, which had been cancelled in a former Argentinian state bankruptcy.
The media hype on the occasion of some „vulture funds“, which have bought Argentinian bonds at a discounted rate and then claimed the whole nominal value of the bonds (victorious before US courts, but successfully rejected by Argentina until at least the expiry of the „Rufo clause“) has created the mood for a majority in the UN General Assembly for a global state insolvency procedure.
The UN General Assembly Resolution „Toward the establishment of a multilateral legal framework for sovereign debt restructuring processes“ (file number A/68/L.57/Rev.1) has been concluded at the 09.09.2014 and demands the creation of a state insolvency procedure. It has been filed by Bolivia with probably many good intentions at the 28.08.2014, but its content gives more weight to the banks than to the debtor states, not to speak of the human rights of their populations. http://www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/68/304
The resolution wants to prevent „vulture funds“ and others from getting a higher percentage of their claims via litigation than the majority of the private creditors (recitals 16+18+19+24). It wants, that the UN Millenium Development Goals are reached (recitals 1, 21 and 26), and it wants sustainable development (recitals 11 and 26). „Sustainable development“ means treating economical growth, social progress, and the protection of the enviroment as equally important with each other. The resolution wants to achieve, that sovereign debts do not hinder sustainable development (recitals 11+12). The resolution wants debt relief, including debt cancellation, and debt restructuring as well as debt crisis prevention and debt management tools (recital 13), and it wants to reduce the prevalance of sovereign debt crises and to prevent unsustainable debt situations (recital 21).
The last of the 27 recitals demands a stronger weight for the principles and purposes of the UN Charter. In contrast to many other resolutions, the universal human rights are only implicetely mentioned (as parts of the purposes of the UN Charter) – a clear sign, that they are intended to be outflanked, that they are not intended to become the standard for the debt sustainability analyses of the global state insolvency procedure !
At the same time, the resolution creates an unreasonable time pressure. It demands the creation and adoption of an international treaty for an international state insolvency mechanism within the 69th session period (no. 5 of the resolution), which means no later than probably at the next regular session (the 70th) of the UN General Assembly, probably in September 2015.
No. 4 of the resolution encourages the UN to continue its support for „sustainable development“ (economical growth, social progress, and environmental protection), and encourages IMF and World Bank („the international financial institutions“), to continue its support for „a durable solution to the problem of the debt of the developing countries“ – „within their respective mandates“.
That includes, that the UN shall cease any interference into the mandates of IMF and World Bank regarding the debts of the developing countries, which would mean a decisive restriction to the UN human rights bodies in their role to protect the social and the civil universal rights of the populations of indebted developing countries.
No. 3 of the resolution invites IMF and World Bank („the Bretton Woods institutions“) and the private sector, „to take appropriate measures and actions for the implementation of the commitments, agreements and decisions of the major United Nations conferences and summits, in particular those related to the question of the external debt sustainability of the developing countries“.
The invitation to IMF, World Bank and the private sector, to take such measures makes it highly probable, that the IMF definition of „debt sustainability“ would be applied within the international state insolvency procedure.
What the IMF means by „debt sustainability“ is shown, i. a., in no. 39 of the report on Greece (file number A/HRC/25/50/Add.1), see section IV.4.1 of this submission.
Recital 26 regognizes, „that debt-restructuring processes should have as their core element a determination of real payment capacity so that they do not adversely affect economic growth and the fulfillment of the unfinished business of the Millenium Development Goals, the sustainable development goals and the post-2015 development goals.“
So it focuses on the debt repayment capacity. It does not demand a further debt reduction to reach the Millenium Development Goals, the sustainable development goals and the post-2015 development goals, but recital 26 demands only, that the state insolvency procedure does not adversely affect those aims. If the state insolvency procedure wants to reduce the debts not further than to the debt repayment capacity, then the banks will finance the desired development only, if they get as security, what the states still have – public utilities and sovereign institutions.
The invitation by no. 3 of the resolution of the 09.09.2014 to the private sector to „measures“ and „actions“ reminds of the arbitrary practice of the IMF, to allow private banks to add their conditions to be imposed on the debtor countries additionally to the ones already drafted by the IMF (so-called „Vienna Initiative“, see sections IV.4.4 and V.7.4 of this submission) and of the formulations used in Europe before the introduction of the ESM, in whose state insolvency procedure the assembly of the private creditors officially can impose political conditions in exchange to partly debt relief.
Recital 23 at the bottom of page 3 notes „with concern that the international financial system does not have a sound legal framework for the orderly and predictable restructuring of sovereign debt, which further increases the costs of non-compliance“.
That recital demands something, which does not exist yet, and for the benefit of the „international financial system“, i. e. for the internationally active banks, not for the benefit of the indebted states and even less for the benefit of their populations. It demands „predictability“ and „orderliness“ for the benefit of the big banks. „Predictability“ could be interpreted in the way, to implement the rules of the international state insolvency procedure even insofar, as they collide with human rights – even though the universal human rights are part of the „ius cogens“ and thus higher-ranking than normal international treaties including those of the UN.
The application of the human rights would mean, because of the indivisibility of the human rights, the predictability of a compromise between the different human rights and between the different groups of the population and of the creditors – but would not mean a predictability for the benefit of the „international financial system“.
The term „framework“ obviously refers to the treaty for the international state insolvency procedure, which to create and to conclude still in the 69th session period the resolution of the 09.09.2014 demands. And that state insolvency procedure would then „further increase“ the costs of „non-compliance“. That refers mainly to the social and human costs among the population of the debtor countries, as far as not all conditions imposed within the state insolvency procedure were fulfilled. The „further increase“ means in comparison to the costs, which „non-compliance“ has today, namely, to the costs of „non-compliance“, if a state does not fulfill all conditions imposed on it by the IMF, and then not only the IMF, but also the private creditors refuse to give further money. The costs of „non-compliance“ cannot refer to the „vulture funds“, because they today do not face any serious costs for their attempts to get more than the other private creditors.
This is further shown by recital 24, according to which the international state insolvency must faciliate „the orderly restructuring of sovereign debts“, allow „the re-establishment of viability and growth without creating incentives that inadvertantly increase the risk of non-compliance and acts as a deterrent to disruptive litigation that creditors could engage in during negotiations to restructure sovereign debts.“
The deterrence of „disruptive litigation“ obviously refers to the „vulture funds“, so that the „non- compliance“ must mean something else, namely the costs of non-compliance with the conditions imposed on the debtor state. In addition to that, the increase of the costs of „non-compliance“ aims at prescribing the international state insolvency procedure as the only way to deal with the state bankruptcy, i. e., to prohibit the sovereignly managed state bankruptcy.
No. 5 of the resolution names as goals of the international state insolvency procedure its „view, inter alia, to increasing the efficiency, stability and predictability of the international financial system and achieving sustained, inclusive and equitable economic growth and sustainable development, in accordance with national circumstances and practices“. The big banks („international financial system“) are named at first, showing the focus, who would benefit most, and inclusive and equitable growth and sustainable development only depending on the circumstances.
Recital 19 informs, that IMF and World Bank have conducted studies regarding „vulture funds“. Recital 15 recognizes „the sovereign right of any state to restructure its sovereign debt, which should not be frustrated or impeded by measures emanating from another state“.
But that recital does not demand, that measures emanating from IMF, World Bank, or private creditors should not impede that right.
Recital 25 states, for the state insolvency procedure „the importance of establishing a clear set of principles for the management and resolution of financial crises that take into account the obligation of sovereign creditors to act in good faith and with a cooperative spirit to reach a consensual rearrangement of the debt of sovereign states“. Also that recital does not demand the same from IMF, World Bank, or private creditors.
Recital 22 stresses „also the need to continue to address systemic fragilities and imbalances and the need for continuing efforts to reform and strenghten the international financial system“.
That reminds of the Imbalance Procedure of the EU, by which, in the name of addressing imbalances, conditions drafted by the EU Commission are imposed on states without giving them any loan in exchange for the conditions. And also at the universal level, what is going to be done in the name of addressing imbalances, is intended, more than anything else, to benefit the „the international financial system“ (the big banks…).
The G 20, in contrast to that, have an imbalance procedure, in which the G 20 member states just give each other economical and financial peer advice, without imposing anything on each other. The IMF has been really upset, that it cannot impose conditions via that G 20 imbalance mechanism (box 6 at page 25 of the IMF paper „Obstacles to International Policy Coordination, and How to Overcome Them“, December 2013).
No. 2 of the resolution „calls for the intensification of efforts to prevent debt crises by enhancing international financial mechanisms for crisis prevention and resolution, in cooperation with the private sector, with a view to finding solutions acceptable for all.“
This seems to refer to a possible extension of the tasks of a global state insolvency mechanism, possibly with the view of giving preventive loans to debtor states to impose conditions earlier. Recital 20 reminds of works for the creation of an international state insolvency procedure conducted in 2003 by the IMF, „with support of the International Monetary and Financial Committee“.
The paper „A New Approach to Sovereign Debt Restructuring“ by the then first Vice CEO of the IMF, Mrs. Anne Krueger, from April 2002, wanted a state insolvency procedure to achieve the equal treatment between the creditors, and with insolvency judges to be chosen by the IMF. The human rights of the populations of the debtor countries have not been within the scope of the IMF. http://www.imf.org/external/pubs/ft/exrp/sdrm/eng/sdrm.pdf
The NGO Erlassjahr is one of the NGOs, which are today working at the UNCTAD (the UN organ responsible for trade issues) level for the preparation of a draft treaty for the international state insolvency procedure. According to the UNCTAD webpage, the UNCTAD is the organization responsible for working out the state insolvency procedure.
Erlassjahr has developed its own model „FTAP“ for a state insolvency procedure with three mediators per country in the state insolvency, which draft an insolvency plan, which then is decided solely by the assembly of the private creditors. And the human rights are NOT intended to be part of the standard for the drafts by the mediators or the decisions by the private creditors. Erlassjahr claims, that they want to reach the Mille-nium Goals that way, but what they propagate is a mix between TTIP (3 mediators per country) and ESM (decisions by the assembly of the private creditors).
The resolution of the 09.09.2014 is the hitherto most important document for the historical interpretation (art. 31 Vienna Treaty Law Convention), and it clearly gives the banks and the IMF decisively more weight than any human rights of the population of the debtor countries. Regarding the already experienced mass destructions of human lives with hunger and diseases via IMF credit conditions, see section V.7 of this submission.
IV.6 The role of the state and of the citizens in a state insolvency procedure and in a „Gewährleistungsstaat“
In section 2 of his paper „Arguments against the insolvency of national states – Philosophical and Economical Foundations to Solve the Problem of Public Debt“, Prof. Dr. Franz Hörmann explains decisive contradictions of the idea of a state insolvency procedure. https://sites.google.com/site/buergerrechtemenschenrechte/das-ende-der-schuld
Either national states are „subjects of international law“ or „corporations“ (enterprizes).
If we regard national states to be the former, „and we follow democratic principles, then they represent the legislative communities themselves, including those institutions setting the legal standards as e.g. commercial law. It would make no sense whatever to implement rules of commercial law (like the rules of insolvency) for standard setting bodies governing commercial law and insolvency rules, we would end up in a recursive cycle. Standard setting bodies in democracies are not corporations, therefore insolvency rules cannot be applied onto them.“
And if national states were instead „corporations to which the rules of insolvency (generally speaking commercial law) may be applied, then, we have to ask: ‘Who is the legal owner of those corporations?’.
When applying commercial law we must distinguish partnerships (with liable owners) from corporations (whithout personal liability of the owner). If we assume a partnership we must ask who the legal owner is, because he is liable in case of insolvency. If we consider the national state to be (or function in a similar way as ) a corporation, we must ask in what legal position the government and the population must be regarded. Quite clearly government acts as the management and therefore as the decision maker. The population then acts as the employees of the corporation. But employees are never legally liable in case of insolvency, definitely not under the rules of commercial law: in case of insolvency they are creditors, never debtors!“
If national states were corporations, then there would be liable „the shareholders as well as managers, the decision makers“. And „another important question would be who the legal owners of the corporation are (the shareholders) and by which contract or similar legal act they became owners. If the national state is a corporation, then where is the accounting? Where are all the (known and unknown) assets, who bought them and at which price? Where are the liabilities and who are the creditors of the national states and what were the business events leading to public debt? Who signed the contracts? Where is public disclosure? And, last not least, where are the ‘free markets’ where everyone can buy a share of the national state after carefully reading the highly valued information of the financial statements that certified public accountants audit so
diligently every quarter? Anonymous shareholders owning stock of national states without all those central elements of the free market economy are not even thinkable because they run counter to all
known and practiced rules of our western societies. So the only possible conclusion is that neither on the ground of international law nor following commercial law can we justify or derive insolvency rules for national states.“
Some further aspects should be added. The state insolvency procedure gives to the citizens only the disadvantages. They stay below the sovereignty of the state, but the state can not guarantee any more, that the public tasks (e. g. health services, social security, judiciary, inner and outer security, education) are fulfilled, which justify the existence of sovereign power, and it transfers large parts of its sovereign power to creditors and after the privatization to private firms, who have never been elected by the citizens. Elections and referenda would become meaningless. The citizens are made to pay, as if they were shareholders, but they are not given any power like that of shareholders. And as far as they are paid employees of the state, the reduction of their wages will be part of the imposed austerity measures, instead of granting them the participation in the assembly of the private creditors. The sense of the state is concentrated to the function to provide sovereign power to private firms, and to raise the money from the population to pay for that. The government and the parliament would remain as an electable facade, but their decisions would be imposed by the assembly of their private creditors (at least as long as they remain in the state insolvency procedure). Executing the sovereign functions of the state would become a profitable business, and government and parliament would not be able any more to make sure, how and in which quality it would be done. The direct attack of the JP Morgan Bank against the basic rights of the national constitutions (section VIII.1 of this submission) as such needs to be seen also in that connection, to free the state (and so the firms it commissions with the sovereign tasks) from many of the basic rights obligations, for whose fulfillment the public institutions and services had been created. From the perspective of the population, the very existence of any sovereign power over them would loose any sense and legitimation. The international state insolvency procedure would lead to a drastical change of the type of state world-wide, would defacto deprive all states, which undergo that prodecure, of their sovereignty, and reduce them to the role to commission private actors with sovereign power over their population, which is obviously incompatible particularly with art. 2 par. 1 UN Charter (sovereignty) and with art. 1 no. 3 UN Charter (universal human rights).
V. Inhumane strictness
V.1 Conclusions; odious and illegitimate debts and credit conditions as a result of the inhumane strictness
Debts connected to credit conditions, which deliberately have violated the human right to health and the core contents of other human rights, have to be cancelled. The legal obligations to make the conditions „very strict“ (no. 49 of the report of the Task Force), strict as in the „practice“ of the IMF (conclusions of the Ecofin Committee of the 09.05.2010, file number SN 2564/1/10), and as those imposed on Greece (preamble of the EFSF Framework Treaty) show the intention to go further, than what is legal under the human rights.
A fair calculation of that part of the debts, which is connected to such inhumane part of the conditions, could be estimated as follows.
Most of the excessive conditions can be measured in the amount of money, which their implementation has cut more than what would have been legal from a human rights perspective, particularly regarding the funds needed for the health (i.e. particularly supply with medicaments, health services, enough healthy food, and housing). Also the lack of benefits for the living in comparison to the absolute poverty line (related to Greek costs of living) regarding those people, who, because of the credit conditions, have fallen below the absolute poverty line (related to Greek costs of living), needs to be included into that calculation, but not the lack of benefits for those people, who have not brought below that line because of the conditions. So we get to an estimated figure for the odious and illegitimate part of the conditions, which then should be related to the total figure of austerity conditions. The same percentage of odious and illegitimate conditions we get by that, should be cancelled of the debts incurred via „Greece Support“ and via EFSF.
The odiousness and illegitimateness of the debts connected excessive credit conditions comes more from the areas sensible to the health of people, in which the cuts are imposed, than from the total figure of the imposed austerity measures. So also the conditions, which are the reasons of the odiousness and the illegiti-mateness of the debts connected to them, need to be repudiated as odious and illegitimate, for they cause the human damage, more than the loans used to impose such conditions.
In addition to that, there should be an additional debt reduction to compensate, that the excessive strictness like that of the „practice“ of the IMF has been wanted systematically and with the legal rank of EU primary law (and so incompatible with ius cogens according to art. 53 Vienna Treaty Law Convention), and that Greece has been and is being abused as a pretext for that, even though such a strictness has been completely unnecessary (section VI. of this submission).
Debts connected to credit conditions, which deliberately have violated the human right to health and the core contents of other human rights, are odious and illegitimate from several perspectives. Debts connected to such conditions have not benefitted the people of the debtor country (compare the debt relief to Cuba in 1898). They are illegitimate from the perspective of the standards of AFRODAD perspective because of their connection with „inappropriate structural adjustment conditions“. They are illegitimate measured at the standard of Jubilee USA Network, because they have given for ideological reasons, not for the development of Greece or other countries. They are very illegitimate at the standard by Jubilee South, because they are used „as a tool of domination that ensures easy access by creditor nations and institutions to the resources of the South“, more strictness means more access. Regarded from the standards by Joseph Hanlon, those debts are illegitimate because of unacceptable conditions (policy conditions in violation of national laws) and of inappropriate conditions (including policy lending linked to unsuitable policies). From the perspective of the standard of the New Economic Foundation, those debts are onerous because of unreasonable terms.
The debt sustainability analysis at the standard of the human rights (compare section II. of this submission) has to take place after the cancellation of the odious and the illegitimate debts. It serves for a fair compro-mise between the human rights of the population and of the creditors regarding the legitimate part of the debts, and has to completely protect the health of the population.
V.2. The obligation to the „strictness“
All financial assistances in the scope of mechanisms connected to art. 136 par. 3 s. 1 TFEU are oriented to the protection of the „financial stability“ of the financial sector and are connected, according to art. 136 par. 3 s. 2 TFEU, to „strict“ conditions.
The wording of art. 136 par. 3 s. 2 TFEU does not explicitely say, which amount of strictness is meant, so that, for the interpretation, one has to look at the context and at the object and purpose of the prescription (art. 31 par. 1 Vienna Treaty Law Convention).
Art. 31 Abs. 2 Vienna Treaty Law Convention prescribes an order regarding the interpretation of the context of a international treaty prescription:
-the prescription itself (here art. 136 par. 3 s. 2 TFEU)
-the „preamble“ of the prescription (art. 136 par. 3 TFEU does not have an own preamble)
-the „attachments“ of the prescription (art. 136 par. 3 TFEU does not have any attachments) -any instrument connected to the prescription, regarding which the treaty parties have been in agreement, that it is related to that treaty
Those instruments, which have the closest connection to the creation of art. 136 par. 3 s. 2 TFEU, and which have been concluded by the most official respectively the highest-ranking bodies, have the highest importance for the interpretation.
Art. 136 par. 3 TFEU has been initiated by the European Council at the summit of the 16.+17.12. 2010. So the recitals of its initiation and the conclusions of that summit obviously have the closest connection and the highest importance. Unfortunately, those documents give no clear explanation, what amount of strictness is meant.
The most important documents for the interpretation of the strictness of art. 136 par. 3 s. 2 TFEU are the conclusions of the Ecofin Council published at the 10.05.2010 (file number SN 2564/1/10) and the report of the Task Force of the 21.10.2010. Both bodies include, i. a., the Financial Ministers, and they are the ones to decide on the conditions in most of the mechanisms connected to art. 136 par. 3 TFEU.
The „strictness“ of the conditions is for all these mechanisms prescribed as in the „practice“ respectively like the „modalities“ of the IMF (Ecofin Council (Economic and Financial Ministers in the EU Council of Ministers) of the 10.05.2010) respectively „very strict“ according to no. 49 of the report of the „Task Force“ of the 21.10.2010. The „Task Force“ included the Financial Ministers of all EU member states as well as the then EU Currency Commissioner Olli Rehn, the then ECB President Jean-Claude Trichet, the then chairman of the Eurogroup Jean Claude Juncker (today President of the EU Commission), and the then President of the European Council Herman Van Rompuy, who at the same time leaded the task force.
conclusions of the Economic and Financial Ministers (Ecofin) in the Council of Ministers of the 09.05.2010, published 10.05.2010 (file number SN 2564/1/10) http://www.bundesregierung.de/ContentArchiv/DE/Archiv17/_Anlagen/2010/2010-05-10-beschluesse- eurolaender-finanzminister.pdf?_blob=public
recommendations of the „Task Force“ of the 21.10.2010
The ESM, in addition to that, is obliged by art. 3 ESM Treaty, to make „strict“ conditions.
The Economic Government is obliged by recital 4 in connection with art. 7 EU regulation (EC) 472/2013 (in the draft version recital 3 in connection with art. 6 EU regulation 2011/385 (COD)), to impose „strict „ conditons
In addition to that, all conditions within the EFSF are, according to the preamble of the EFSF Framework Treaty, prescribed as strict as they are towards Greece:
see EFSF Framework Treaty of the 07.06.2010
in 2011 concluded modified EFSF Framework Treaty (draft of the 26.08.2011)
The BBC article „Eurozone Approves Massive Greece Bail-Out“ of the 02.05.2010 refers to an article of the Bild newspaper, according to which the German Chancellor Dr. Angela Merkel has had the idea, that Greece has followed a path with the IMF, which is not easy, and that all other countries would do everything to prevent this for them. http://news.bbc.co.uk/2/hi/europe/8656649.stm
That the preamble of the EFSF Framework Treaty demands as strictness as towards Greece, needs to be seen in the light of that idea.
The „practice“ of the IMF is something completely different than the content of the statute („Articles of Agreement“) of the IMF. In the statute of the IMF, there is no obligation to inhumanity at all. By means of an excessive immunity against penalty law and against liability as well as by means of excessive payment, however, the standards of moral and of viewing the world are, within the IMF, in a way shifted, resulting in IMF conditions without any respect to basic rights and to human rights of the populations of the debtor countries.
According to art. 31 par. 3 lit. b Vienna Treaty Law Convention, international treaties are interpreted also in the light of its actual application. But that can lead here to no milder assessment in view of the created humanitarian catastrophe particularly in the Greek health system and the large number of Greek long-term jobless people below the absolute poverty line, in view of the strictness towards Greece as the example of the conditions imposed via the EFSF (Preamble EFSF Framework Treaty), and in view of the strictness towards Greece at the example of the IMF as a deterring sign towards the other states of the eurozone.
V.3 How art. 136 par. 3 TFEU (from the perspective of the EU law) outflanks the universal law
The IMF law has the rank of normal international law, it stands like the vast majority of international law just one stage above the simple national law (art. 27 Vienna Treaty Law Convention), and so clearly below the universal human rights, which belong to the „ius cogens“. The IMF itself is not bound to the universal human rights treaties, only as a UN special organization to the UDHR, but because of the preeminence of the universal human rights in comparison to the IMF law, no debtor state has ever been entitled or obliged, to fulfill the conditions of the IMF any further, than they are compatible with the universal human rights.
The UN Charter is, according to its own art. 103, the highest-ranking international treaty. Because the UN Charter, at the same obliges to the respect for the sovereignty of the states (art. 2 par. 1 UN Charter), the UN Charter itself, as a result, is positioned directly below the national constitutions of the UN member states, but above any other international treaties.
The rank of the universal human rights, i. e. the UDHR and the human rights treaties of the United Nations, is, regarded from the perspective of the universal human rights law itself, below the UN Charter (art. 29 no. 3 UDHR), but above the rest of the international law (art. 28 UDH, art. 1 no. 3 UN Charter), except for the Geneva and Haag Conventions of humanitarian law, which are equal- ranking to the universal human rights (ICJ advisory opinion of the 08.07.1996 “Advisory Opinion of the International Court of Justice of 8 July 1996, The Legality of the Threat or Use of Nuclear Weapons, Reports 1996”).
The UN Charter and the universal human rights belong to the „ius cogens“, the highest category of nearly world-wide valid international law (no. 279-282 of the judgement of the EU Court of First Instance on file number T-306/01, and the ICJ advisory opinion of the 08.07.1996 mentioned above).
The TEU and the TFEU and the protocols and annexes to these two treaties are the EU primary law. The EU primary law has, from its own perspective, a rank above the national constitutions of the member states (art. 1 TEU, art. 51 TEU, declaration no.17 in the annexes to TFEU and TEU). This stands in contradiction to the rank of the UN Charter and of the universal human rights, because also the EU law is international law.
The constitutional courts react, depending on their constitutional situation, differently on the rank claim of the EU law. According to continuous jurisdiction of the Polish constitutional court, the Polish constitution is the highest law at Poland and so stands also above the EU law (see e. g. Judgement of the 16.11.2011). The German constitutional court regards since the Lisbon judgement of the 30.06.2009 the constitutional identity (especially basic rights and structure principles, but also the state objectives peace principle (art. 1 par. 2 Basic Law) and European integration (art. 23 Basic Law)) as standing above the EU law (basic principle 4 and no. 216+217 Lisbon judgement), but allows the EU primary law a rank above the rest of the German Basic Law (no. 240) – except for the common foreign and safety policy of the EU (no. 255 + 342), which has the rank of only normal international law. According to basic principle 3 of the Lisbon judgement, the implementation of the EU law has to leave enough space for the universal human rights, but the German constitutional court has not clarified, if it regards the EU secondary law (EU guidelines, EU regulations, etc.) or the universal human rights as higher-ranking.
Also the Latvian constitutional court has in its judgement of the 22.12.2009 (file number 2009-43- 01) confirmed the preemince of the basic rights and structure principles of the Latvian constitution before the EU law.
In art. 29 par. 4 no. 10 of the Irish constitution, however, an explicit preeminence of the EU law before the Irish constitution is prescribed.
The EU law, even though the high rank it claims for itself, does NOT belong to the „ius cogens“, because this category comes only into consideration for law, which is at least nearly world-wide valid.
These examples show, that the rank claims of the EU law and of the universal human rights stand in compe- tition to each other.
V.4 EU Basic Rights Charter can not protect against the systematical attack against the heatlth Also the EU Basic Rights Charter does NOT seriously protect the inhabitants of the eurozone against the systematical attack on their health by means of the strictness according to art. 136 par. 3 s. 2 TFEU.
Art. 136 par. 3 TFEU stands above the EU Basic Rights Charter. According to art. 52 par. 2 EU Basic Rights Charter, the content of TFEU and TEU („the Treaties“) is explicitely preeminent to any EU basic rights. As a result, the excessive strictness of art. 136 par. 3 s. 2 TFEU limits the application of all EU basic rights. According to art. 52 par. 5 EU Basic Rights Charter and to the explanations of the EU Convent to this paragraph, the social EU basic rights (meaning especially the whole part „solidarity“ from art. 27 to art. 38 including, e. g., the right to social security (art. 34), the right to health care (art. 35), the right to protection against unjustified dismissal (art. 30), the right to prohibition of child labour and to protection of young people at work (art. 32), the right to collective bargaining and action (art. 28), the right to environmental protection (art. 37), and the right to consumer protection (art. 38)) are all non-binding „can/may“ – prescriptions – in a drastical contrast to social basic rights of national constitutions and to social universal human rights.
In addition to that, the EU Basic Rights Charter is, according to its art. 51, applicable only on EU law (like on EU regulations, EU guidelines, etc.), and on national law of the member states, as far as this implements EU law. As a result, the EU Basic Rights Charter is applicable on the EU regulations for the Economic Government (for tightened Stability and Growth Pact, Imbalance Procedure, and Budgetary Surveillance). It is also applicable on the EU regulations for the „Greece Support“ and for EFSM.
But the EU Basic Rights Charter is not applicable on intergouvernemental treaties outside the EU law, such as the ESM Treaty (no. 179-182 of the ECJ judgement of the 27.11.2012 on Pringle ./. Ireland) and the EFSF Framework Treaty. As a result, it cannot limit EFSF and ESM credit conditions.
In addition to that, the memoranda of understanding with the conditions imposed on Greece do not show any serious consideration to limit the imposed conditions according to the EU Basic Rights Charter, not to speak according to the universal huamn rights or to the basic rights of the national constitution of the debtor state.
Limitations of the conditions according to the human resp. basic rights have only be half-way accepted, when they have been judged by Constitutional Courts, such as in Portugal.
V.5. Humanity in the minority within the IMF board at the 09.05.2010
At the 09.05.2010, a controversial debate has taken place at the board of the IMF (Wallstreet Journal article „Past Rifts Over Greece Cloud Talks on Rescue“ of the 07.10.2013) http://online.wjs.com/article/SB10001424052702304441404579119180237594344.html
The voting rights in the IMF are according to the respective shares of the countries in the common stock capital, and countries with smaller shares have a joint Executive Director on the board of the IMF, whereas countries with larger shares have their own Executive Director.
Nearly a third of the Executive Directors, representing over 40 non-European countries, have had severe objections and held the opinion, that the credit conditions would one-sidedly burden the Greek population, and that the conditions, at the same time, would demand nothing from the creditors. Some of them prognosticated, that the program would fail, if the debts of Greece were not reduced. Among them, the Argentinian Executive Director has held the opinion, that a voluntary abandonment of claims of the creditors should have been on the table, and that the IMF risked only to postpone a Greek state bankruptcy.
A further group of 38 states, represented in the IMF board by Brazil, Russia, Canada, and Australia, has seen immense risks of the credit conditions. Among them, the Brazilian Executive Director has regarded the program as not sustainable and as mainly a bail-out to the benefit of European financial institutions.
The IMF board granted the IMF part of the funds for the „Greece Support“ with the votes of the Executive Directors of most European countries and of the USA, which together have a majority of the capital shares of the IMF.
Unfortunately, the „practice“ of the IMF is not, what a significant minority of 78 member states at the 09.05.2010 has wanted, but what usually is included as credit conditions in its memoranda of understanding, and what is usually put through disregarding the limits, which the human rights set.
That the majority of the European members of the board of the IMF has granted the IMF share for the „Greece Support“, even though there has already been the argument, that it helped the creditors and not the Greek population, is a further piece of evidence, that the European Financial
Mechanism including the „Greece Support“ aims at preserving the claims of the creditors of Greece, not the Greek people.
V.6 The strictness applied on Greece as a disregard of universal human rights, particularly of the human right to health
Among the universal human rights, besides the human dignity (art. 1 UDHR), which is the legal basis of the indivisibility of the universal human rights, the universal human right to health (art. 12 UN Social Pact) is of eminent importance. According to no. 1 general comment no. 14 to the UN Social Pact, the sense of the human right to health is the ability to lead a life in dignity. Also for this reason, the human right to health is the only universal human right, which explicitely garantuees the, for the respective human being, highest attainable standard of health. According to no. 32, the principal prohibition of retrogression (which results from the social progression clause of art. 2 par. 1 UN Social Pact) has the effect regarding the human right to health, that the state has regarding retrogessions at the human right to health, not only the burden of proof, that all available financial means have already been exhausted before, but also the the burden of proof, that these retrogressions are justified with a view to the total of the rights of the Social Pact. This means, if cuts need to be made regarding the realization of the universal social human rights, then these cuts need to be done, relatively less regarding health than regarding any other social human rights.
Also regarding the universal human right to food (art. 11 Social Pact), the central importance of the human dignity (art. 1 UDHR) and of the human right to health (art. 12 Social Pact) is shown. For, according to no. 8 general comment no. 12 to the UN Social Pact, the core of the human right to food includes the availability of food in sufficient amount and quality needed for the nutritional needs of every single human being, which is free of detrimental substances and acceptable in the respective culture; and the access to food should take place sustainably and should not violate the enjoyment of other human rights.
The general comment no. 8 of the 12.12.1997 (file number CESCR E/C.12/1997/8) on the UN Social Pact has clarified, in how far human rights have to be respected, even when sanctions are imposed. Sanctions are an answer to grave violations of international law. Getting a loan from an international institution obviously is not comparable to that. As a logical result, the maximum allowed interventions into human rights in connection with loans are less than maximum allowed for sanctions.
According to no. 3 of general comment no. 8, sanctions often cause „significant disruption in the distribution of food, pharmaceuticals, and sanitation supplies, jeopardize the quality of food and the availability of clean drinking water, severely interfere into the function of basical health and education systems, and undermine the right to work.“ According to no. 5, an assessment of the effects is necessary before the imposition of sanctions and „arrangements for the provision of humanitarian assistance to vulnerable groups“. Furthermore, according to no. 7, besides the state affected by the sanctions, must also „the international community do everything possible to protect at least the core content of the economical, social, and cultural rights“ of the population of the country affected by the sanctions. The international community is, according to no. 14, to a substantial degree obliged to react „individually and through inter-national assistance and cooperation“ on „any disproportionate suffering experienced by vulnerable groups in the targeted country“. According to no. 15, decisions which reduce „suffering of children“ or of other „vulnerable groups“ , are always to be considered as compatible with the „policy aim of sanctions“ – this means, that sanctions may never increase the suffering of vulnerable groups. In no. 16, the committee calls such violations of international law (among them violations of the UN Charter), which justify sanctions, as „lawlessness“. But it also calls the violation of the universal human rights in the course of the imposition of sanctions also „lawlessness“. The committee does not look closer in this general comment, which actual or presumed violations of international law justify sanctions. The general comment no. 8 solely focusses on the protection of the core of the social universal human rights regarding all sanctions, and especially for vulnerable groups.
The UN General Assembly has, at the 14.12.1990, concluded basic principles for the treatment of prisoners (file number A/RES/45/111). Those basic principles clarify, in how far countries may intervene deeper into the human rights of prisoners than into those of other people, and in how far their human rights have to be implemented as much as for any other people in the respective country.
It is very obvious, that the maximum allowed interventions into human rights regarding credit conditions is lower than the maximum allowed interventions into the human rights of prisoners. No. 5 of the resolution clarifies, that only those interventions into the universal human rights of prisoners are allowed, which are necessitated by their incarceration.
According no. 9 of the resolution, „prisoners shall have access to the health services available in the country without discrimination on the ground of their legal situation“.
The access to any needed medicaments and health services had to be secured as well as the healthy nutrition and a decent housing for everyone had to be secured because of their crucical importance for the health of the Greek population.
It had to be made sure, that any person in Greece, including the many long-term jobless people and small- holders and also the refugees without health insurance received their needed medicaments and health services.
And it had to be made sure, that no reduction of wages, pensions or benefits for jobless people would bring anyone below the absolute poverty line related to Greek costs of living.
See, e. g., a Greek study from May 2011 on the absolute poverty line in Greece in the year 2009: http://www.iippe.org/wiki/images/8/80/CONF_2011_Thanasis_Maniatis.pdf
The austerity measures in the Greek health sector have, however, not been limited, to what has been achievable by efficiency gains without excluding any people from needed medicaments and services.
Particularly the reduction of the minimum wage and of the benefits for short-term jobless people, and any measure increasing the number of long-term jobless people (such as the loosening of the protection against wrongful dismissal) and of smallholders without any benefits for their living, have obviously been incompatible with the human rights to health, also the use of savings of the hospitals for the debt servicing, thereby creating shortages in the hospital supply.
In a debt sustainability analysis at the standard of the human rights, the expenditures needed for the health of the population have to be secured, which would also include regarding Greece particularly the coverage of the needed medicaments and health services and of the extension of the benefits for living to all jobless people, and also an increase of the minimum pensions, the minimum wage, and the benefits for jobless people to the absolute poverty line related to Greek costs of living, so that any inhabitant of Greece has at least access to housing, to enough healthy food, and to the needed medicaments and health services.
Only human rights claims of the Greek population, which are not related to their health, may become, within the scope of a debt sustainability analysis, to an appropriate degree and respecting their core contents, weighed in a fair compromise with the human rights of the creditors to property and to social security.
But that had not been intended. The legal obligation of all conditions imposed via the European Financing Mechanism and via the EU Economic Government to be strict as in the „practice“ of the IMF systematically enables to get more out of the respective debtor country, than there would be possible with respect to the health, not to speak of the core contents of the other social human rights.
V.7 The strictness of the IMF
This section shows, what a strictness according to the „practice“ of the IMF is, so that one can prognosticate up to which inhumanity the conditions imposed via the European Financing Mechanism and via the EU Economic Government have been intended to go at maximum.
V.7.1 Prognosticable conditions against the food supply
The credit conditions of the IMF destroy intentiously the ability of the states, to independently provide their own population with food, and they serve for the effect, that less areas are available for food cultivation and more areas for the export.
A central motive for the intentious decline of the food supply of the whole population of a debtor state seems to be, that this way whole peoples, and not only governments and parliaments, can easier be forced to obey to other conditions and to the debt servicing. Because food is, in contrast to capital, no societal fiction, but necessary for survival. The conditions always aim at making impossible a food supply independent of the world market. Most often, the currency devaluation imposed by the IMF, leads to market-distortingly high prices for the import of fertiliziers, pesticides, tractors, etc.; in addition to that, price limits for these imports are prohibited. The purchasing power of the domestic customers of the farmers is destroyed by the enforced reduction of wages and of social benefits. Social institutons for the farmers, e. g. for the distribution of water and for additional subventions in times of market price declines, are abolished. Support shipments of highly subventioned agrarian surpluses are, where trade liberalization does not suffice, used intentiously to ruin whole economical segments of family farmers. Where all this is not enough, sometimes smaller agricultural enterprizes are simply prohibited (e. g. at Peru) or projects are financed (e. g. at Mozambique), which imply the expulsion of formers. With the destruction of the family farmers structures and with the aim of the bigger enterprizes to the export, the states do not only become dependend on the import of fertilizer, pesticides, etc., but also on the import of food, which they have to pay in hard currency – and that together with an own currency, that has been artificially devaluated at the command of the IMF.
According to the chapter “50 Jahre Bretton Woods” („50 years Bretton Woods“) in Uwe Hoering’s book “Zum Beispiel IWF & Weltbank” („for example IMF and World Bank“) (Süd-Nord Lamuv publishing house), riots have taken place because of cuts into subventions imposed by the IMF: -1985 at Bolivia (because of cuts into food and fuel subventions)
-1986 at Zambia (because of cuts into food subventions)
-1989 at Venezuela (because of cuts into fuel and transport subventions)
The IMF has demanded, even during the Asia crisis, also from Indonesia cuts into the food and fuel subventions („Die Chancen der Globalisierung“, Joseph Stiglitz, Pantheon publishing house, p. 304).
The cuts into food subventions as IMF imposed conditions are no singular cases, but rather usual: „…for Western banks, which wanted to safeguard their credits, money was there, but not for the minimal food subventions, which should save human beings from dying of starvation.“
(„Die Chancen der Globalisierung“, Joseph Stiglitz, Pantheon publishing house, p. 39)
At Somalia, a country, 50% of whose population have worked as livestock breeders (p. 97, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky), since the beginning of the 1980ies, because of IMF conditions, the currency has been devaluated (resulting in rising costs of fuel and fertilizer, p. 96) , the grain market been deregulated (p. 96), the veterinary services been privatized (p. 96), the emergency supplys of animal fodder been abolished (p. 96), the
water been privatized (p. 97), and the fight against erosion been neglected (p. 97). In sum, the public agricultural expenditures have been reduced by 85% (p. 97) in comparison to the middle of the 1970ies. The collapse of the Somalian agriculture also is shown by the fact, that at the beginning of the 1980ies, the sale of food aid had already become the main source of revenue for the Somalian government (p. 97).
At Ruanda, the 1990 structural adjustment program of the IMF served for starvation. In the country, which had already been focused on coffee cultivation, the national fund for the securing against falling coffee prices has been abolished together with all other public agricultural funds. Added to this were the known effects of currency devaluation and trade liberalization on the domestic agriculture (p. 106 + 107, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky). Finally at 1992, even the coffee price for the farmers of Ruanda has been legally limited because of a condition of the World Bank (p. 108). Amidst the Ruandan civil war, the IMF enforced a further currency devaluation even though the country already had to export a part of its food because of the one-sided focus on coffee cultivation (p. 108). The trade liberalization of the grain markets enforced by IMF and World Bank have had the effect, that the food aid has been implemented in a way, which has further ruined the domestic agricultural production (p. 109). According to the International Committee of the Red Cross, over 1 million people have been starving at Ruanda at 1993 (p. 122, foot note 14). Ruanda has, even though the dominant coffee cultivation, been self- sufficient regarding food, until it has allowed in 1990, because of an IMF credit condition, the dumping of highly subventioned US and EU food surpluses (p. 140).
At Mozambique, IMF and World Bank have supported with their credit conditions big agricultural projects, for which the state has obliged itself, to replace to expel family farmers for the benefit of big firms, which are focused on export (p. 126-131, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky), and which do contribute nothing to the nutrition of the Mozambiquans.
Ethiopia produces enough for the covering of 90% of the existential needs of its inhabitants. According to the world food organization FAO, from 1999 to 2000, the province Amhara reached 20% respectively 500.000 t grain surplus, and the province Oromiya 600.000 t grain surplus. At the same time, at Amhara were 2,8 million people starving, and at Oromiya 1,6 million people, a clear example, how the one-sided orientation on export, which has been imposed by IMF and World Bank, in combination with the destruction of the food cultivation for the domestic market creates starvation (p. 137+138, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky), particularly sind half of the export revenue went into the debt servicing (p. 139). The hunger appears at Ethiopia with a regionally stongly varying distribution, as a result from the prohibition of the financial redistribution between the provinces and the federal level, which had been imposed by the IMF (p. 139), with the result, that the starvation areas did not get any financial aid against the hunger from the federal level or from the other regions any more. Before the starvation at Ethiopia, the World Bank imposed removal of the price limits for fuel and fertilizer (p. 139) and the also World Bank credit condition imposed removal of all Ethiopian agricultural subventions had taken place. The agricultural trade has been liberalized at the command of the IMF (p. 139). Ethiopia has been forced, for the ruin of its family farmers food production by means of food aid with genetically manipulated grain, to allow the access of seeds corporations on the public seeds reserves, and been forced to cancel the family farmers’ seeds network (p. 142+143).
The deregulation of the grain market at Kenya, imposed by IMF and World Bank, as well as the also commanded prohibition of any distribution of food by the state and prohibition of even any public regulation of the food distribution have led in 1991 and 1992 to the starvation of nearly 2 million people at Kenya’s dryer provinces (p. 140).
At Zimbabwe and Malawi, the IMF enforced the change from food cultivation to tobacco cultivation.
At 1992, the maize harvest declined at Zimbabwe by 90 % and at Malawi by 40%. 1992 was a drought year in the Southern Africa. The tobacco export revenues went into the debt servicing instead of the fight against starvation (p. 100, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky).
For Niger, officially one of the poorest countries of the world, the IMF has, in 2004, prohibited the creation of food reserves. Amidst the famine at Niger, in which 3,6 million people have stood at the abyss, the IMF has even prohibited any free distribution of millet, in the name of preventing market distortions. And not only such distributions, which could have cost the state Niger money and could have reduced its debt servicing, but even the distribution of millet by the United Nations and by NGOs (Germanwatch interview with Prof. Dr. Jean Ziegler of the year 2005) http://www.germanwatch.org/zeitung/2005-4-ziegler.htm
Niger is no individual case. Also Malawi and Ethiopia have been forced by the IMF to sell the public food reserves for a higher debt servicing, Ethiopia just before the famine of 1984/1985.
On Ethiopia, see p. 141 of the book „The Globaliziation of Poverty and the New World Order“ by Prof. Dr. Michel Chossudovsky and the Global Research article at the link: http://www.globalresearch.ca/index.php?context=va&aid=366
On Malawi, see the taz article „Der Hunger geht, die Armut bleibt“ http://www.taz.de/1/politik/afrika/artikel/1/der-hunger-geht-die-armut-bleibt/
At India in 1991, the removal of food and fertilizer subventions commanded by the IMF served together with the also commanded currency devaluation for the increase of the rice price by 50% (p. 150+153, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky, published 2003). At India, family farmers and farm workers are together 400 million people (p. 151). The removal of the fertilizer subvention, which had been explicitely demanded by the IMF (p. 151), led in 1991 to the increase of the fertilizer price by 40% and ruined many small agricultural enterprizes. The formal removal of the legal limit to landownership, imposed by IMF and World Bank (p. 154), has been a decisive incentive for the expulsion of familiy farmers by big landowners, who prefer producing for export than in comparison to producing food for the own population. As a result of the removal of the wages indexation, also enforced by IMF and World Bank, hundreds of millions of Indian people (among them particularly agricultural workers and smallholders) had to live on (convertedly) 50,- US cent per day while at the same time costs of living rising towards the world market, including a 50% increase of the rice price. Prof. Dr. Chossudovsky speaks , therefore, of „economic genocide“ (p. 154) by IMF and World Bank at India. The harsh accusation by Prof. Dr. Chossudovsky regarding India may cause wondering, because many other countries have got even more brutal and even more intentious conditions against their food supply, it is, however, justified, because at no other country of the world are so many starving people, and because IMF and World Bank and not wars, caste system, religious intolerance, gene technology or anything else have the main guilt for that.
At Bangla Desh, the IMF enforced, at the beginning of the 1980ies, the removal of the agricultural subven- tions, enforced the trade liberalization, and the deregulation of the grain market (p. 161, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky). For the destruction of the food supply by family farmers, finally the program „food for work“ has been used, where village inhabitants had to work solely for food. This been made possible by the trade liberalization enforced by the IMF. The economical ruin forced many farmers to a new start at areas, which were particularly endangered by floods. This is the explanation for 140.000 people killed by the flood at 1991 (p. 165) and 10 millionen homeless people because of the flood. Just in 1991, the IMF enforced a currency devaluation, which resulted in the increase of the rice price by 50%, and which tightened the flood-induced famine decisively. Far distributed undernourishment and a lack of vitamin A have already existed at Bangla Desh before the flood, and typical IMF conditions have a crucial share in the causes of this.
At Vietnam, farmers have been encouraged by the World Bank, to cultivate for export instead of food for the own population (p. 177 Chossudovsky). Because of the decline of the world market prices for the respective export commodities, Vietnam got into the situation, to subvention food exports, while the farmers of the country were starving as a result of the IMF typical curency devaluation including the increase of the prices for fuel and fertilizer connected to it. In 1994, a famine has taken place with 50.000 affected people, while in the same year, because of the collapse of public rice trade companies, two million tons of Vietnamese rice remained unsold (p. 178). In the years 1987 to 1990, 25% of the adults and 50% of the children at Vietnam were undernourished (p. 179). The enforced orientation to export has also led to the expulsion of family farmers by big landowners (p. 182).
The film „Raubzug des IWF in Argentinien“ of Kanal B of the year 2002 shows clearly the behaviour of the IMF at Argentina. The country has, until the beginning of the military dictatorship in the 1970ies, been one of the countries with the highest standard of living at Latin America and with a broad middle class. Argentina has received its first IMF loan already one week after the assumption of the military dictatorship in 1976. At the end of the dictatorship, the country had 30,- billon $ debts, half of which have been publid bailouts of private debts. From 1983 to 1989 always more public expenditures, because of the pressure by the IMF, have been reduced, from 1989 to 1992 all public enterprizes have been privatized. Since the Menem government, the cuts also in the social area became so strong, that the starvation begun, years after the end of the dictator-ship. According to the journalist Sebastian Hacher (Indymedia), in the year 2002 at Argentina, 100 children per day died of starvation; this means 36.500,- children died of starvation per year at that time at Argentina, a high number especially in comparison to a total number of 30.000,- people during murdered by the Argentinian military dictatorship. And the adult Argentinians, who have died of starvation because of the IMF, are not counted yet in this number. At demonstrator at the demonstration of the jobless people at the 11.03.2002 estimated the number of starving people at that time alone for the area Buenos Aires to circa 4,- million people.
In order to keep the control at Brazil even though the mass layoffs in the public sector and the removal of the public pension insurance in 1994 after the constitutional change, which had been enforced by the IMF for these purposes (p. 195 ff. „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky), a part of the reduction of the expenditures has been used for food aid to the inhabitants of slums. In rural areas, there are, in addition to that, model projects, where landless people are gives exhausted agricultural areas (or can buy them with the help of World Bank loans), which seem not profitable enough for the big landowners. And the areas are given to the landless people, which are not in the land register, but are the property of Indigenous people, whereas in 1994 the constitutionally guaranteed property rights of the Indigenous people had been streaked according to the command of the IMF. Instead of paying for food for all, the IMF let it happen, that instead the state paid to big landowners for the employment of land workers, and that food aid supplies were also used for the targeted destructed of the food cultivation of family farmers (p. 195 and 201-202, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky).
The Brazilian “Fome Zero” (null hunger) program of President Lula da Silva, which wanted to free a seven digit number of Brazilians from starvation, but which has been realized in an only significantly reduced form, because the IMF has not granted a debt moratorium, which had been requested for the benefit of Brazil (Germanwatch interview with Prof. Dr. Jean Ziegler of the year 2005).
At Peru, 83% of the inhabitants are undernourished because of the conditions (p. 31, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky). The country has been exposed several times to shocking IMF conditions. From 1980 – 1983, the undernourishment of children has risen dramati-cally, and from 1975 to 1985, the food consumption of the total population has shrinked by 25% (p. 209). The decline of the real wages from 1980 to 1985 has been at 45% (p. 209). Even significantly more drastically directed against the food supply have been the IMF conditions at August 1990, when the rapid combination of artifical currency devalution, limitation of the wages, and letting loose of the prices, resulted in the increase of the prices, in comparison to the wages, within one month, for fuel to the 31-fold, for bread to the 12- fold, and for food in the average by 446 %. The IMF enforced, in the name of the fight against the hyperinflation of August 1990, layoffs in the public sector, cuts social in the social system, and the reduction of wages (p.216). Since the hyperinflation with all its effects like the increase in price of fertilizer etc., has not been enough for the destruction of the family farming at Peru, the IMF simply enforced its prohibiton by means of a legal minimum size for a farm of at least 10 ha; and only with at least this minimum size, agri-cultural loans have been available (p. 221).
At Bolivia, the trade liberalization, enforced by IMF, together with aid shipments, served for a decline of the production costs between 1985 and 1988 by 25,9 % (p. 232, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky).
At Russia, the combination of artifical currency devaluation and of releasing the prices, both imposed by the IMF, served at 1992 for to a hundredfold increase of the prices, while, in the name of the fight against inflation, only a tenfold increase of the wages has been tolerated. The price of bread has risen operproportio-nally from between 17 and 18 kopeks to 20 rubles (p. 240, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky). The food supply sank below the level it had during World War II (p. 241). In 1993, the IMF, in addition to that, effected by the deregulation of a big Russian bread fabric, a further between tripling and quadrupling of the bread price (p. 249).
The family farmer food cultivation at Albania has been pushed back by a combination of trade liberalization, of food aid from subventioned grain surpluses, from currency devaluation (resulting in price increase of fertilizer and fuel, shrinking of the real wages etc.), and the destruction of the domestic seeds production (in order to make dependened on more expensive seeds).
(„The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky)
That these IMF conditions at the cost of the starving cannot be rare single cases, is shown by the official report of the 07.02.2001 (file number E/CN.4/2001/53) by Prof. Dr. Jean Ziegler, the then UN Special Rapporteur for the human right to food, according to which (see no.. 69c of the report) the credit conditions of IMF and World Bank are world-wide the second-biggest cause for the starvation in the world, even more than biotechnology in agriculture and than wars. http://www.righttofood.org/new/PDF/ECN4200153.pdf
In 1990, world-wide 822 million people, in 2007 ca. 923 million people, and in 2008 ca. 963 million people have starved. At the 19.06.2009, already about a billion people were starving. http://de.wikipedia.org/wiki/Welthunger
At 2004, enough food has been produced for 12 billion people (interview with Prof. Jean Ziegler in the edition 4/2005 of the Germanwatch newspaper). According to the then actual world food report, neverthe-less, in 2004, more than 100.000 people per day were starving of starvation or of the
immediate effects of starvation; in the average of the year 2004, each 5 seconds a child below the age of 10 died of starvation.
V.7.2 IMF conditions one of the main reasons for the rise of tuberculosis und further diseases According to an article of Dr. F. William Engdahl, who is a member of the globalization research network „Global Research“, of the 27.11.2009, are among the most recent IMF conditions towards the Ukraine drastical cuts in the health sector, among them the closure of hospitals and layoffs in the health sector. The behaviour of the IMF towards the Ukraine is a proof, that the IMF even after the start of the economic crisis still acts in the same way, hostile against human rights. The Ukraine has been affected particularly hard by the economic crisis, by a speculative bubble and by a deep recession.
In this context, Dr. Engdahl reports on a study of the Cambridge University of the year 2008, which has statistically proven by 21 middle and eastern European countries, that states, which have been under IMF conditions, have had a significantly higher tuberculosis rate than states without IMF conditions.
The publication date 22.07.2008 of the study shows, that it has depicted a time before the current economic crisis.
According to Dr. Engdahl, the IMF is, in view of the drastical cuts in the health sector, als called „infant mortality fund“.
Dr. Engdahl explains, that particularly a significant increase of the tuberculosis deaths indicates a fast worsening medical supply, because tuberculosis is a disease with a fast course.
The Canadian economist Prof. Dr. Michel Chossudovsky, a colleague of Dr. Engdahl in the globalization research network Global Resarch, names on p. 62 and 63 of his work „The Globalization of Poverty and the New World Order“ the dramatical decline of health-related control and prevention activities because of austerity conditions by IMF and World Bank as the reason of the comeback of cholera, yellow feaver, and malaria to the south of the Sahara, and the spread of malaria and dengue fever at Latin America, as well as the decline of the hygiene and of the public health institutions because of austerity conditions by IMF and World Bank as reasons for the comeback in 1994 of bubonic plague at India.
Prof. Dr. Chossudovsky’s work „The Globalization of Poverty and the New World Order“ contains further number on the destruction of the health system by IMF conditions:
-The health expenditures at Somalia have been reduced by 78% between the 1970ies and 1989 because of IMF conditions (p. 97).
-The malaria rate at Ruanda has risen in 1991 under IMF conditions by 21% (p. 108). At Ruanda, the World Bank enforced moderating fees of the patients and mass layoffs in the health sector (p. 111).
-At Bangla Desh, in 1992 have been 1,50 $ per inhabitant and year have been spent for health, 25,- cent of it for medicaments. The creditors enforced further cuts in 1992 and 1993.
-On Vietnam have been imposed the payment for particular health services by the patients and the release of the prices of the medicaments (p. 185). As a result, the exependitures for medicaments have been reduced by 89% between 1980 and 1989, and 98,5% of the Vietnamese pharma industry has been destroyed. Ten thouands of health workers incl. doctors have got unemployed. Hospitals have been closed, because too few of the patients were able to pay on their own for the health services. In order to prevent the reconstruction of the health sector, the finances of the medical
faculties have been massively cut (p. 186). According to the WHO, the number of malaria deaths threefolded, and already defeated diseases, such as tuberculosis, reappeared at Vietnam (p. 186). -At Brazil, the health expenditures have been reduced by 50% in 1993 (p. 197).
-At Peru, the the austerity measures in the health sector including the closure of hospitals, the hyperinflation, the undernourishment, and the lack of funds for the cooking of water, favoured since August 1990 the spread of cholera (in 1991 with more than 200.000 ill people and over 2.000 deaths within 6 months) and the comeback of, i. a., malaria and dengue fever (p. 216).
-At Albania (p. 291), the enforced payments of the patients themselves and the mass layoffs in the health sector supported the outbreak of cholera (1995) and the polio epidemic (1996).
The behaviour of the IMF before the economic crisis and with the elevation of such inhumane condition to a rank of EU secondary law, gives a light taste on, how much the IMF or the Troika respectively the EU Commission would rage after the carde blanche enabling, which is wanted by art. 136 par. 3 TFEU – or how private creditors would rage in the framework of the Vienna initiative and of the state insolvency procedure of the ESM, which would also obligate the private creditors to impose on the debtor states conditions with a strictness according to the „practice“ of the IMF.
V.7.3 Proof of the inhumanity of the „practice“ of the IMF at the example of the UNICEF study „Adjustment with a Human Face“
The UNICEF study „Adjustment with a Human Face“ (1987) depicts the effects of credit conditions of the IMF on poverty and need and develops proposals for more humane austerity measures.
The page numbers quoted refer to the German edition. As far as in this part of this text English quotations are in quotation signs, this is the non-authorized (as wordly as possible) translation from German into English by my husband (Volker Reusing, same address as Sarah Luzia Hassel- Reusing), which possibly is not exactly identical to the English original, because we have only the German version of the study.
UNICEF mentions in „Adjustment with a Human Face“ „reckless cuts of the state expenditures for health, which are often part of an adjustment program“, and which „lead to a worsening of the state of health of the population“ (p. 87). UNICEF mentions as example the „outbreak of deadly infectious diseases among children“ at the Brazilian province Sao Paulo because of the delayed introduction of a vaccination program against measels (p. 87+95); it seems to be the same measels epidemic, which also Prof. Dr. Jean Ziegler mentions in his work „Imperium der Schande“ (Bertelsmann publishing house). At Ghana, according to UNICEF, cutting the expenditures for medical basical supply has led to the increase of frequency, distribution, and deaths by infectious diseases (p. 87).
In 1984, IMF adjustment programs in the Brazilian province Sao Paulo led to a steep rise of the infant mortality (p. 95). This seems to be related to food, for according to UNICEF, the inflation from 1981 to 1983 at Brazil has been 400 %, but higher for food, because the IMF conditions have forced the country, to push back the cultivation for the favour of grain and sugar cane for export (p. 94).
„A radical reduction of the food subventions in favour of investment activities as a part of a new adjustment package have led in Sri Lanka“, according to UNICEF, „to an increase of undernourishment of third degree among the children of the poorest“ (p. 87).
UNICEF, in addition to that, quotes a study, according tho whom the child mortality at Chile has temporarily risen in 1983 by 10% because of the temporary cancellation of a public child food program, and which has decreased again after the reenactment of the program in 1984 (p. 87+88+97). According to another study, the undernourishment of the children of Chile at school
age has risen from 1980 to 1983 from 4,6 % to 15,8 % , and from 1981 to 1984 also the frequency of typhus and hepatitis (p. 97). UNICEF, however, also applaudes to Chile for its free school meals, for its food programs for children until the age of 6 years, and for support programs for pregnant women and children up to the age of 8 years, who live in extreme poverty (p. 97). This means, that in other countries with IMF conditions, respective programs to limit the starvation of children have not been or been in a lesser amount (than in the Chile of Pinochet) available.
At Gambia, according to UNICEF, the undernourishment of children has risen in 1985 as a result of increased food prices (resulting from IMF conditions) without social mitigating measures (p. 88).
Ghana received IMF loans and structural adjustment conditions in 1983. UNICEF looks at the time form 1980 to 1985, so that only a part of the social effects are to be attributed to the IMF. Because of the collapse of the cacao prices, the per-capita income has already fallen by a third from 1974 to 1982. At 1982 (before the IMF), the whole available food at Ghana reached only 68% of the need of calories (p. 98). The child mortality has risen from 10% (1980) to 11% (1983) and 12% (1984). Between 1979 and 1984, the health expenditures per capita at Ghana have sunk by 80% (p. 98). There has been a mass exodus of qualified personnel of the social sectors. UNICEF applauds to the IMF only for the reduction of the inflation, which had been three-digit before, but its programs were primarily orientatied on the economical situation. The measures, which UNICEF recommended for Ghana (p. 99 +100), show, that the health system and the own food production have had virtually to be rebuild again. UNICEF demanded „food for work“ programs and speaks about a „big gap in the food supply“ (p. 100).
Jamaica received loans by the IMF at 1980 and at 1984, the one in 1984 with significantly tougher conditions. UNICEF has observed the years 1978 to 1985 (p. 101). While before 1984, a five person household could cover its nutrition with 75% of its income, at 1984 only 50% of the needed food could be bought from that income. And from October 1984 to March 1986, the price of the needed food basket has risen by 45 %. The prices of grain, flour, maize flour, and rice have risen even stronger. Public aid programs have reached only a part of the undernourished (p. 102). From 1981 to 1986, the health expenditures at Jamaica have been reduced by 33 %; fees have been introduced for the health services (p. 102). The percen-tage of children with visible signs of undernourishment has risen from 38% (1978) to 41% (1985). From 1978 to 1985, the number of gravely undernourished children admitted to hospital doubled, the number with diseases of stomach and bore tripled, whereas the strongest increase has taken place from 1983 to 1985.
Peru has been regarded by UNICEF for the years 1977 to 1985. The country received from 1977 to 1978 and from 1982 to 1984 IMF loans.
Among the conditions have been the removal of any food subventions (p. 103 + 104). The average food supply per capita has fallen by 26% (p. 104). The tuberculosis rate has risen (an interesting parallel to the IMF induced rise of tuberculosis in the former eastern block countries during the 1990ies, part V.2 of this letter).
The Philippines received an IMF loan at 1984. A result was, that the tax financed subsidies for the elementary health supply has been reduced to a fifth of the amount to the respective subsidies to hospitals of the upper class. At 1985, the real wages have been at a fourth of the poverty line (estimated by the World Bank) of a six person household, in rural areas at only 22% (p. 106). The health expenditures have fallen from 1979 to 1984 by a third (p. 103). The number of underweight children under 5 years has grown from 17 % (1982) to 22 % (1985).
The UNICEF study emphasizes the „urgency of new solutions“, because the „current approach“ tends to cause poverty, and if one regards „the direct negative effects of some of the macroeconomic measures for the health and the nutrition of the poorest and particularly of the children“. According
to UNICEF, the ignorance of the „needs of the poor“ is „not only ethically reprehensible, but also contraproduktive“ (p. 89).
V.7.4 „Vienna initiative“ older than anticipated and systematical abuse of power of the IMF at the favour of specific big banks
The Grenadian economist Davison Budhoo, who had served, i. a., as „resident representative“ of the IMF for Guayana, cancelled his job at the IMF at the 18.05.1988 with an open letter, which has been published in the form of a book by New Horizons Press. As a complete version is available to me only the German translation, published by the Heinrich-Böll-Stiftung in 1991 „Genug ist genug“. You find a part of the English text in the internet at http://www.naomiklein.org/files/resources/pdfs/budhoo.pdf
As far as in this part of this text English quotations are in quotation signs, this is the non-authorized (as wordly as possible) translation from German into English by my husband (Volker Reusing, same address as Sarah Luzia Hassel-Reusing), which possibly is not exactly identical to the English original, because we have only the complete German version.
In 1986 and 1987, the IMF has already given the possibility to particular private banks, as a reward for their willingness to give loans of 16 billion $, to impose on states „their own macroeconomic conditionality“ (p. 130), „whose logical consequence has been the annihilation of even more third world children, after already because of our judgement and that of the World Bank, which we ourselves had written, millions had been killed or chosen for death.“
For significantly smaller loans than those of the IMF itself, the IMF enabled private banks without any legal basis, to add to the conditions created by the IMF their own particular-interest-like and in no way less human-rights-ignoring conditions, which then have also been put through by the IMF.
Already in the time from 1983 to 1986 there have been, according to Budhoo, 27 cases, in which the IMF has included particular private banks, and in only one case these banks have been willing, to accept the credit conditions, which had already been negotiated between the IMF and the respective state, in the other 26 cases they insisted on adding their own political conditions (p. 131+132). So the IMF granted to banks already from 1983 to 1986 in at least 27 cases the power to reject „commitments concluded between the IMF and its member states in the third world, if these commitments, from the point of view of these banks, did not protect their own interests in a way, like they should be protected“ (p. 132). Unfortunately, Budhoo does not say, if for this surprisingly high number of 27 states, which the IMF has subjugated also under completely unlegitimated banks, these bank had at all (as the 16 billion $ in 1986 and 1987) to give from themselves new loans to the respective countries . This way, banks could straightly put through conditions, they could „care after their own number one“ (p. 132). For the accumulation of interests of private banks in view of the IMF, as a result, i. a. the International Institute of Finance and the Japan Centre for International Finance have been founded (p. 132). The IMF even sends, by order of banks, within the scope of the „enhanced surveillance“ commitment, delegations to the debtor countries in the South (p. 132).
So it is depicted, that already the obligation to a strictness according to the „practice“ of the IMF means the informal contribution by the private creditors of conditions for the Troika or the EU Commission within the mechanisms connected to art. 136 par. 3 TFEU.
The term „Vienna initiative“ for the enforcement of political conditions, which have been formulated by big private banks, has come into existence not before the beginning of this century, when the IMF has done this for Austrian banks against Eastern European states.
V.7.5 Strictness of the „practice“ of the IMF at the service of big banks
The book „Die Chancen der Globalisierung“ (Pantheon publishing house) by Joseph Stiglitz, a former chief economist and former vice-chairman of the World Bank, exposes that also the IMF has served more for banks in their quality as creditors of the states, than for its official task, for which the IMF had been created, namely to help states, which are experiencing a lack of liquidity, with loans.
As far as in this part of this text English quotations are in quotation signs, this is the non-authorized (as wordly as possible) translation from German into English by my husband (Volker Reusing, same address as Sarah Luzia Hassel-Reusing), which possibly is not exactly identical to the English original, because we have only the complete German version.
At page 272, he says:
„At crises, the IMF granted to debtor countries, which were unable to pay, loans within the frame of a so-called bail-out – but the money did, in the end, not benefit the country, but the Western creditor banks, whose claims have been covered with it. At Eastern Asia as well as at Latin America, these supportive loans have served the purpose to pay foreign creditors, who were released of the necessity to carry the costs of the loss of their claims from the loans the had given carelessly. In some cases, governments have eben bailed out private debts and have this way, in fact, socialized private risks. They have helped the creditors out of their unconfortable situation, but the money of the IMF has not been a gigt, but only a further credit- and the developing country had to pay for it. In fact, the tax payers of the poor country paid for the unreliable policy of the rich countries regarding giving credits.“
The parallel to Greece and to the recapitalization of banks from tax payer money within the scope of EFSF and ESM is obvious.
On page 58, Stiglitz says in a chapter on the Asia crisis:
„Critiques of the IMF claim, that its conditions serve, in principle, not the aim to protect countries against recession, but to protect the interests of its creditors. Behind this stands the purpose, to refill the foreign exchange reserves as soon as possible, in order to be able to fulfill the claims of the creditors.“
Stiglitz shows the extent of the one-sided-ness of the IMF for the benefit of the creditors at the example of Ethiopia, where the IMF has, for the question, whether the budget was balanced, not counted the foreign aid as revenue (p. 66). As a result, the Ethiopian government did not dare to use the foreign aid for the purposes it had been given for, but added it to the country’s foreign exchange reserves, thus alienating these aids from their purpose, so that the possibility was left open, to use these funds later for the payment to the creditors of the country.
At page 279, Stiglitz shows at the example of Argentina, that this country had to choose in its acute debt crisis, if it took new IMF loans, just in order to pay back old IMF loans. The money would just have been transferred from one IMF banking account to another IMF banking account.Argentina, however, would have got additional condition for this by the IMF, which would have further aggravated the recession. Argentina at that time really managed to get a partly debt cut by the IMF, and to reject any new IMF conditions, in turn for paying back the rest of the debts, the country had to the IMF. The IMF had already forced Argentina before to privatize its public pension insurance and to increase the prices for water and electricity (p. 278).
Argentina has made the experience, that the IMF intentiously delayed the state bankruptcy of the country, in order to be able to put through before as much conditions as possible (p. 281): „When Argentina admitted to a particular condition, the IMF posed new conditions, in order to prolong the agony of Argentina, and to make the default of the debt servicing as expensive as possible.“
Stiglitz shows the one-sided-ness of the IMF also on p. 279-280:
„A former IMF employee explained, that his institution just represents the interests of the creditors (of whom the IMF has been the biggest), and these were oriented to create fear of a state bankruptcy. The IMF wanted, that every sovereign country, which considers declaring its default, thinks for a long time and intensively, before it takes this step. No court can force a sovereign country to fulfill its debt service; normally, there are no or only few assets, which can be confiscated (in contrast to private insolvencies, where the creditors can liquidate an enterprize or objects given to them as securities). Only fear has driven them to the debt service; without fear, loans would not be payed off, the bond market for the debts of states would simply dry out.“
The fear of getting separated from the capital market is, according to Stiglitz, shown particularly drastically at Moldova, where 3⁄4 of the state budget go into the debt servicing (p. 281).
At Botswana, the IMF put through the increase of the interest rate in the private economy to 60%. See German translation of an interview of Emperor’s Clothes with Prof. Dr. Michel Chossudovsky: http://notgroschen.blogspot.com/2012/01/internationaler-wahrungsfonds-iwf-und.html
The most extreme example of one-sided-ness of the IMF on the side of the creditors, happened in 1992 at Brazil, where the IMF insisted, that the government first had to reach an agreement with the big private creditors, before an IMF loan came into consideration – that’s what via art. 12 ESM Treaty (part V.4 of this letter) is going to be entrenched for the first time in the primary law of an international organization. That had the result at Brazil, that the government consented to an increase of the interest rate towards its biggest private creditors from 30% to 50% (p. 192 and foot note 2, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky). In 1999, the IMF enforced, in connection to a „preventive“ credit, the increase of the Brazilian base rate to 39%, what led to interest rates for the Brazilian private economy between 50% and 90% and for private credits between 150% and 250%. And Brazil has been ordered by the IMF, to use the currency reserves of its central bank to defend the Brazilian currency against speculators, who tried next after the Asia crisis, to speculate down the Brazilian currency. This way, the reserves of the central bank shrinked from July 1998 to January 1999 from 75,- billion $ to 27,- billion $ (p. 349+350, „The Globalization of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky).
Prof. Stiglitz mentions Russia as a positive example, which has got again access to loans on the financial market only 2 years after its default, which the country has managed in 1998 in a sovereignty respecting way (p. 282), because financial markets evaluate future risks and less the behaviour to the creditors in the past. For this purpose, it is important, that the debt reduction is high enough, to give new creditors confidence in the ability of the country to pay off future debts.
In the Asia crisis, the IMF has received direct counselling by some banke regarding the credit conditions on the states, which the IMF gave loans at that time (p. 325, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky“). Among them were, according to Prof. Dr. Chossudovsky, i. a., Chase, Bank America, City Group, J.P. Morgan, Goldman Sachs, Lehman Brothers, Morgan Stanley, and Salomon Smith Barney, independently from the question, which of these banks might have contributed to the Asia crisis by means of currency speculations.
In 1998, the IMF forced several Asian countries, among them Indonesia, to loosen their restrictions on caprial movements including making easier the speculation with currencies. And at the same time, the IMF forced them to use large amounts of their national currency reserves for the purchase of their own currency with the aim to prevent the devaluating speculation of the domestic currency, while at least the waste of the currency reserves for the support of the currency exchange rate had been recommended to the IMF before by the international private bank association IIF (p. 325+326, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky“).
In 1998, there has even been an initiative of some world’s biggest private banks, in order to give their influencing and their insider businesses with the IMF a legal appearance. In a „Private Sector Advisory Council“, which was going to be filled with private banks, they want to surveil the correctness of the work of the IMF, and they would have harvested at that opportunity insider knowledge to an unprecedented extent (p. 326, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky“).
At South Korea, the issuing bank has been restructured under direct control by IMF and Wall Street banks (p. 328, „The Globaliziation of Poverty and the New World Order“, Prof. Dr. Michel Chossudovsky“).
V.7.6 Further insights from Davison Budhoo’s letter of dismissal regarding the inhumanity of the IMF
In section V.7.5 of this submission, I have shown, according to Davison Budhoo’s letter of dismissal to the IMF, that the strictness according to the „practice“ of the IMF, which art. 136 par. 3 TFEU prescribes for all mechanisms referring to this prescription, is not only primarily for the purpose of the securing ob big banks, but that the „practice“ of the IMF also includes to allow big banks even to contribute to the draft of the political conditions to the states.
Davison Budhoo’s letter of dismissal („Enough is Enough“) of the 18.05.1988 (published as a book in English at New Horizons Press) as well as the German translation („Genug ist Genug“) published by the Heinrich-Böll-Stiftung in 1991 and the texts in the foreword of the German translation, however, contain significantly more pieces of information.
As far as in this text wordly quotations from those parts of his letter of dismissal, which are not published in the internet, or from the foreword of the German translation are contained, then these quotations are avai-lable to me only in German language, so that they have been translated for the ICC by my husband back into English as wordly as possible; the result is, that they cannot be completely identical to the original English quotations.
Davison Budhoo has been, as an employee of the IMF, responsible for several states at Latin America, among them Guayana. In his letter of dismissal, he has shown the behaviour of the IMF especially at the example of Trinidad and Tobago.
Mr. Budhoo estimated in that letter, that alone at his hands the „blood“ of millions of poor and starving human beings was sticking. It was, according to Mr. Bushoo, so much blood, that it flew in streams, and that the question arose, if there was enough soap at the whole world, to wash him clean from that blood. The word „blood“ can only be meant metaphorically in the sense, that millions of innocent people die because of the conditions of the IMF.
Davison Budhoo raised the question, if the world, when all pieces of evidence regarding the IMF came to light, would be satisfied by denounce the IMF as „among the most insidious enemies of mankind“, and to leave the issue rest, of if the heirs of those, who, so Budhoo, have been „dismembered“ within the scope of the IMF’s „own peculiar Holocaust“, would cry out loudly their claims to a new „Nurembourg“. Budhoo obviously used these terms metaphorically, in order to illustrate an impression of particular cruelty and cold-bloodedness, and because he, in 1988, probably did not yet want to immediately name concrete criminal offences, particularly since the Roman Statute did not exist yet at 1988.
If he was charged, so Budhoo, he would be found guilty, very guilty without any mildering circumstances.
An institution as the IMF without any military arms, can have caused millions of deaths only by means of conditions, which go to the direction of the objective part of art. 7 par. 1 lit. k Roman Statute.
Budhoo accused the IMF, that it destroyed „everything worth preserving“. The IMF was without a soul. He remembered, that the poor people and the people without means are not the unnecessary rubbish, as that the IMF regarded them.
He raised the question, if the personnel of the IMF is running amok as in view of its unexpected big power.
Budhoo accused the IMF, that it, because of an inexplicable impetus, had tried, to first destroy Trinidad and Tobago economically, in order to turn it into a stronghold of the teachings of the IMF („Fund orthodoxy“) after that, and that it had executed intolerable pressure on the government of the country, to act for the nega-tion of particular aspects and agreements, which are entrenched in the constitution of the country, on the basis of which the government works, within which basic rights are recognized and protected, and norms of social justice and economical equality are protected.
According to Budhoo, the IMF is absolutely reckless and unwilling, to tolerate even the slightest divergence from its conditions, and be it allow for a socially just distribution of the burdens on the population. He illus-trated this with the metaphore of a werewolf driving a heavy steamroller.
Budhoos letter of dismissal, in addition to that, contains serious grounds, that the IMF has, already for a long time, significantly evaded beyond the control of its member states. He hints at safety mechanisms in the Articles of Agreement (the statutes) of the IMF, which have never been activated because of the unexpected „hijacking“ of the IMF by its own personnel. According to Budhoo’s observations, even heated debates within the Board of Governors, which is the main assembly of the heads of the issuing banks and of the financial ministers of the IMF member states, have been sit out with appeasement tactics – to such a degree the IMF seems to have got out of control.
According to Mr. Budhoo, the IMF makes sure, that its power is „self-sustainable“.
That means, that always enough states do not get rid of their actual or presumed dependency on the IMF.
Davison Budhoo’s letter of dismissal originates from the year 1988. Even though the reactions of many NGOs and even of several UN special organizations, the actions of the IMF against food and health have been sig-nificantly further tightened particularly since the 1990ies, as shown in the sections V.7.1 and V.7.2 of this submission.
V.7.7 Budhoo’s allegations of genocide against the IMF and then reactions of several UN special organizations
According to no. 2 of Budhoo’s foreword on page 10, UNICEF has, in December 1988, „nach einer gewissenhaften und genauen Untersuchung“ („after a due and exact investigation“) Budhoo’s
„Vorwurf des iwf-inspirierten Völkermordes in der Dritten Welt unterstützt“ („supported“ Budhoo’s „claim of the IMF inspired genocide in the Third World“).
Another document of UNICEF, which gravely incriminates IMF and World Bank, is quoted by Budhoo at page 12. According to him, IMF and World Bank have been „seit 1982 für den Tod von bis zu sieben Millionen Kindern unter fünf Jahren verantwortlich“ („responsible for the death of up to seven million children under five years since 1982“). This has been named by UNICEF „ein gewaltiger Frevel gegen einen großen Teil der Menschheit“ („an outreach against humanity“).
A more exact delimitation of the date of the second quoted UNICEF publication is feasible by the publica-tion of a hearing from 1994 of the NGO Kairos Europa together with, i. a., representatives of the EU Commission and from several developmental countries. http://bocs.hu/~bocs/khear94/hear08a.
At the hearing in 1994, Budhoo said, that within the last 2 to 3 years (from the perspective of 1994, so mea-ning within the years 1991 to 1994), reports of UNCTAD, UNICEF, UNDP, FAO, and of the UN economical commissions for Africa, Asia, and Latin America have categorally condemned IMF and World Bank for what UNICEF has called an „outreach against humanity“. „Outreach against humanity“ obviously is the English original formulation, which has been translated at the Heinrich-Böll foundation into „ein gewaltiger Frevel gegen einen großen Teil der Menschheit“.
It follows from that, that the said UNICEF document, which accuses IMF and World Bank for the death of up to seven million children since 1982, must have been published within the period between the beginning of 1991 and September 1991.
At the UNICEF website, I have, during my recherches at 2012, not been able to find the document. I have got no answer to my question to UNICEF from October 2012, presumably, because the title of the document, which affirms Budhoo’s claim of genocide, is not known to me.
The special relevance of the then incidents is, that and to what extent the IMF must have been aware at least since 1991, in which areas of its austerity conditions it has to be particularly careful to make sure, that they do not cost any lives of human beings, and that already at 1991 nearly no space can have been left for carelessness. The same applies to the EU Commission since the hearing at 1994.
V.7.8. IMF tradition of excessive strictness to enable privatization below of normal market prices
In the article „IMF’s four steps to damnation“ of the Guardian of the 29.04.2001, Prof. Dr. Joseph Stiglitz, a former chief economist of the World Bank, has given deep insights into a four step concept of the IMF:
-first as far-reaching privatizations as possible (explained by Prof. Dr. Stiglitz at the example of Russia under His Excellency, President Boris Yeltsin)
-second opening of the markets
-third „market-based pricing“, meaning the removal of social subventions and social price limits -fourth free trade
Regarding the third step, Prof. Dr. Stiglitz has explained referring to Bolivia, Ecuador, and Indonesia, that some social cuts are made so hard, that they have led to riots, which in turn has reduced the demand and the prices for the assets to be privatized.
If the aim to reach cheaper privatizations has been a motive for the excessiveness of credit conditions of the IMF to Bolivia, Ecuador, and Indonesia, then it is probable, that it has been a part of the motive for the excessiveness of the conditions imposed on Greece, particularly if one regards it together with the objective of the state insolvency procedure of the ESM to enforce the privatization of a large part of the social and of the sovereign institutions of the states of the eurozone, and together with function of Greece as a model according to the preamble of the EFSF Framework Treaty.
VI. Non-disclosure regarding the creation of giral money, „too big to fail“ untenable
The features „overly generous loans“ (Jubilee USA) and „loans to countries in need of grants“ (Joseph Hanlon) of illegitimate debts are fulfilled. And the money for the bank safeguarding has not been for the Greek population. They have been granted because of the knowingly false presentation of bank safeguarding as the safeguarding of the currency euro. At least those parts of the loans given to Greece via „Greece Support“ or EFSF, which have been used for the recapitalization of Greek banks instead for humanitarian needs, with knowledge of the creditors or even imposed by them, are illegitimate and odious, because the banks could also have been rescued with central bank money.
In addition to that, the amount of money, which the bailed out old creditors of Greece have received more, than if there had been no bailout, but a normal state bankruptcy at the standard of the human rights, are illegitimate. As a balance for the privilege to create giral money out of nothing, banks should have in the debt sustainability analysis, which takes place after the sorting out of the odious and the illegitimate debts, a relatively weakter position than the other creditors – in the way, that their claims are treated as ranking, after those of other creditors, or that they get a smaller percentage than other creditors.
VI.2 How giral money is created today
In no. 1 of his paper „Information Money and the End of Global Debt“, Prof. Dr. Franz Hörmann (University of Economics, Vienna) explains, how the creation of giral money functions today. In no. 2+3 of his text, he proposes alternatives other than debt money. http://www.informationsgeld.info/uploads/2/0/1/9/20192907/information_money_and_the_end_of_global _debt.pdf
Today, only 3 % of our money are the legal tenders , the coins and bills in our wallets. 97 % is giral money, which is only a promise to pay out legal tenders.
Giral money comes into existence virtually out of nothing (credit creation theory).
The creation of 100.- € giral money, e. g., happens by the granting of a loan of 100.- €. The entry into the booking account at the bank level for that is „claim (against customer) 100.- € | liability (to customer) 100.- €“. When the loan is paid back, the entry into the booking account is „liability (to customer) 100.- € | claim (against customer) 100.- €“, which then extinguishes 100.- € of giral money. The way of the booking entry is the same independently from the figure of the loan, just the figures change.
All the giral money on the banking accounts are only the debts of the banks created by the act of granting a loan. When all bank loans are paid back, all giral money disappears, creating deflation, joblessness, and poverty; that is true as far as the economy stays within the logic of loan created giral money as the means of exchange, and as one does not switch to alternatives like barter, self- subsistance, or to a kind of money, which is not a debt created one.
The interests, in contrast to that, are created at the bank level by a entry into the booking account like „claim (against customer) 10.- € | interest proceeds 10.- €“. The way of the booking entry is the same independently from the interest rates, just the figures change.
So the creation of the interests increases the capital of the banks, but not their debts. As a result, the total amount of giral money suffices to pay back the total amount of bank loans, but the interests can only be „earned“ by the creation of goods and services in the real economy.
VI.3 The empirical proof
Prof. Dr. Richard Werner (Center of Banking, Finance, and Sustainable Development, University of Southampton) has empirically proven the credit creation theory and disproven the financial intermediation theory and the fractional reserve theory. For the study, a credit contract has been signed with a small bank at the 07.08.2013 and investigated the resulting procedures and booking entries in the bank.
The findings of his study have been published in the article „Can banks individually create money out of nothing? – The theories and the empirical evidence“ at the 18.09.2014 in the International Review on Financial Analysis (Elsevier publishing house). http://www.sciencedirect.com/science/article/pii/S057521914001070
The now proven credit creation theory holds, that the giral money is created out of nothing by the act of the granting of a loan by the bank. The fractional reserve theory says, that the banks get the giral money from the central bank. And the financial intermediation theory holds, that the giral money comes from the savers, who bring their money to the bank.
The empirically proven booking account for the bank has been „loan 200,000.- € | other private financing 200,000.- €“ (table 4 at p. 14). This matches with the credit creation theory. The researcher has also been shown the development of the balance sheet at the 07.08.2013, the day, when his loan has been booked.
In contrast to the financial intermediation theory, the balance sheet has shown no reduction of the cash or of the accounts of the bank with other financial institutions (tables 6+7, p. 15). The credit department of the bank has confirmed to the researcher, that none of them checked their reserve balance or balance of deposits with other banks before signing the loan contract and making the funds available to the borrower (p. 15, appendix 2 at p. 18); so the loan to the researcher has been granted without any direct or indirect use of funds originated from the central bank, thus rejecting the fractional reserve theory of money creation.
As the study points out, the financial intermediation theory of money creation had become the dominant theory, even promoted by central bankers (p. 10+11) and ideologically propagated in some text books (p. 16+17).
As the researcher points out, his empirical proof of the credit creation theory of giral money and disproval of the financial intermediation theory and of the fractional reserve theory „call for a whole new paradigm in monetary economics, macroeconomics, finance and banking“ (p. 17).
VI.4 Every bank is replacable !
That today giral money is created out of nothing leads to a ground-breaking conclusion:
For means of the credit supply and for the supply with giral money, every bank is replacable. If the financial intermediation theory was correct, then banks would need to have as equity respectively to borrow 100 % of the money, which they lend. In reality, the credit Banks do not need to lend their equity, or to borrow money to lend it further at all, they only need a certain percentage of equity in relation to they giral money they create, because of the Basel criteria of the BIS on equity. For the purposes of money creation and of credit supply, no bank safeguarding at all is needed, neither the official bank safeguarding mechanisms like the Soffin in Germany, nor the camouflaged ones like the „Greece Support“, the EFSM, the EFSF, and the ESM.
Also the so-called „too big to fail“ hypothesis is completely untenable, because also big banks are completely replacable. If there is enough demand for giral money, they will be soon replaced by new relatively smaller banks, because only little equity is needed in relation to the credit created giral money out of nothing.
If a state wants to protect the savers up to a certain figure, it can guarantee their giral money at the bank up to a certain amount per person. That would be still much less expensive for the state than the preservation of each the complete bank.
The legal structures of the European Financing Mechanism and of the EU Economic Government would at least not have been bound to the financial stability of the financial sector and to a strictness like in the practice of the IMF, and no state insolvency procedure like that of the ESM would have been created, if the general public had already known, how giral money is created, and that every bank is replacable.
At least the leading persons in all banks and the persons responsible for the booking entries of the loans must have known, that the credit creation theory of giral money creation is correct. They nevertheless have let happen, that a majority of economic scientists and most politicians have believed in the (now disproven) financial intermedition theory. They have knowingly let happen, that banks have received, both from the perspective of national economy and of human rights, inappropriately huge financial safeguarding, and that the populations of the debtor contries have been imposed inappropriately strict austerity conditions.
VI.5 European Financing Mechanism and EU Economic Government are unnecessary
For purposes of bank safeguarding (if one wants that, see section VI.4), and for the prevention of a state bankruptcy, the mechanisms of the European Financing Mechanism and of the EU Economic Government with all of their strictness and the suffering resulting from that, have been unnecessary. As Prof. Dr. Richard Werner and Prof. Dr. Franz Hörmann have pointed out, the banks can be rescued, if the ECB (by means of central bank money) buys the shaky claims of the banks. Meanwhile, the ECB does that and, in addition, buys state bonds at the secondary market, which the ECB, in addition to that, also accepts as securities.
And Prof. Dr. Werner has suggested in 2011, that states shall as far as possible switch to loan agreements with banks instead of emitting bonds, in order to avoid speculative interest rates.
And, as explained in sections VI.2 + VI.3, banks create loans out of nothing.
VII. Germany has not validly consented to the EFSF Framework Treaty
The decision at the EFSF level on the Greek debt resceduling and on the conditions connected to it are legally based on art. 10 par. 5 lit. a EFSF Framework Teraty. They have strongly been influenced by the erroneous impression, that Germany had validly consented to the EFSF Framework Treaty.
That decision has to be repeated without any German participation in order to get an orderly decision with only the participation of those countries, which have lawfully bound themselves to the EFSF Framework Treaty. Until such a new voting will have taken place, any further financial instalments and the implementa- tion of any conditions imposed via the EFSF should be suspended.
Possible financial liquidity gaps for Greece, because of the suspension of the instalments of the EFSF loan, could be closed via loan contracts (instead of the emission of new state bonds) between Greece and the banks, which would bring lower interest rates than the speculative ones at the bond market, and by possible purchases of Greek bonds at the secondary market by the ECB.
In addition to that, those countries of the eurozone, which have bound themselves to the EFSF Framework Treaty based, i. a., on the erroneous assumption, that Germany had also done that, can unilaterally cancel the EFSF Framework Treaty, if they have not contributed with too much carelessness to that error (art. 48 Vienna Treaty Law Convention).
VII.2 How the necessary law consenting to the EFSF Framework Treaty has not materialized
The EFSF relies on two treaties. The countries of the eurozone (the EU member countries whose currency is the euro) have created, in the legal form of a public limited company under Luxembourgian law, a special purpose vehicle, whose shareholders they are. They have done that with a treaty under private law. A special purpose vehicle is something like a bank, but more restricted in the kinds of businesses it can do. That treaty under private law obviously did not need any ratification – in contrast to the EFSF Framework Treaty.
The second treaty is the EFSF Framework Treaty, which is a treaty under public international law. The original version has been concluded at the 07.06.2010. The Summit of the European Council of the 23.+24.06.2011 has concluded to change the treaty (no. 9 of the conclusions of that Summit, file no. EUCO 23/11). The changed version of the EFSF Framework Treaty is from the 26.08.2011; it has, i. a., increased the limit for the state guarantuess for the EFSF loans, and has expanded the scope of EFSF loans (now, i. a., also preventive loans to the states, means for buying state bonds at the secondary market, and loans for states to invest in bank recapitalization). Since the EFSF Framework Treaty is a treaty under international law, the conditions connected to the EFSF loans are transported with a legal rank of international law, which is higher than the simple laws at the national level (art. 27 Vienna Treaty Law Convention).
EFSF Framework Treaty of the 07.06.2010
conclusions of the Summit of the 23./24.06.2011 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/123075.pdf
EFSF Framework Treaty of the 26.08.2011
The EFSF Framework Treaty contains particularly the procedure and the responsibilities, how the EFSF loans and the conditions attached to them are drafted and concluded. The countries of the eurozone give guarantuees for the loans given by the EFSF. The draft conditions to the EFSF loans are filed by the EU Commission (supported by ECB and IMF) and decided by the Eurogroup Working Group (the body at EU level of the Financial Undersecretaries of the member countries) (art. 2 EFSF Framework Treaty).
According to art. 59 par. 2 Basic Law, a law consenting to an international treaty has to be concluded by the Bundestag (national parliament of Germany), before the President of Germany can ratify an international treaty, which regulates the external relations of Germany or the issues of the federal legislative responsibili- ties of Germany.
That the EFSF Framework Treaty could bind Germany only with the orderly consent of at the least the German Bundestag, is obvious in view of the far-reaching power of the EFSF. The countries, which have received financial aid via the EFSF, have been imposed conditions, which have included conditions to change laws at the national level. If Germany will ever receive any financial aid via the EFSF, then it will also be burdened with conditions to change national laws. That alone proves, that Germany would have been bound to the EFSF Framework Treaty, according to art. 59 par. 2 Basic Law, only with a law consenting to the EFSF Framework Treaty. In addition to that, the intended strictness of the conditions (like those imposed on Greece according to the Preamble of the EFSF Framework Treaty, like the practice of the IMF according to the conclusions of the Ecofin Committee of the 09.05.2010, file number SN 2564/1/10, and very strict according to no. 49 of the report of the Task Force of the 21.10.2010) shows, that the interventions into the national legislation are intended to be very deep. Regarding Greece, even the condition to change its national constitution for the blocked account for the external debt service has been imposed (section VIII.2 of this submission).
In addition to that, the EFSF Framework Treaty contains further far-reaching powers, e. g. to decide at the EFSF level on the kinds of financial instruments of the EFSF (art. 5 par. 3), on any change of the EFSF Framwork Treaty (art. 10 par. 5 lit. c), and the increase of the limit to the state guarantuees for the EFSF loans (art. 10 par. 5 lit. i).
Attachment 3 to the EFSF Framework Treaty contains an example for the consent to be bound, in accordance with the respective national prescriptions of the respective state, to the EFSF Framework Treaty (not just to the financial guarantuees). In addition to that, art. 1 par. 1 of the EFSF Framework Treaty prescribes, that the treaty needs the consent of at least 5 countries of the eurozone, which together at least grant 2/3 of the total amount of guarantuees.
The Green fraction in the Bundestag has filed at the 06.07.2010 a draft law (file number 17/2412) to consent to the EFSF Framework Treaty. That law has never been concluded. That fraction had realized, that the EFSF Framework Treaty is a treaty in need of a law consenting to it, and that the StabMechG does not do that.
Their draft law explains in section B of the explanation their arguments for the need of law consenting to that treaty:
-limitation of the freedom of the parliament regarding financial aids because of the joint mechanism at the EFSF level
-a joint mechanism for the management of financial crises affects the power of the respective states within the international community
-decisions regarding disputes on the EFSF law at the ECJ
-EFSF Framework Treaty creates a joint mechanism of the countries of the eurozone, which exceeds the legal basis set in the EU primary law (i. e.TEU and TFEU and the protocols and declarations attached to them)
-obligation under international law by the EFSF Framework Treaty, to keep the granted guarantuees
At the 08.07.2010, the German government has claimed on the occasion of a parliamentary question of the Green fraction (file no. 17/2569), in its answer to question no. 2, that the government has not needed a consent of the parliament to the EFSF Framework Treaty. In its answer to question no. 3, the government has added to its answer an attachment, in whose column „Planned date for definite approval“ the entry for Germany has already been „Finished“. In the column „Parliamentary processes in euro area Member States to participate in the EFSF and to issue state guarantees“, one finds regarding Germany a consent of Bundestag and Bundesrat at the 21.05.2010 and the announcement by the
President. But the date 21.05.2010 is only the date of the conclusion of the StabMechG, which does not give any consent to the EFSF Frame- work Treaty. The term „definite approval“ in the aforesaid attachment can only mean a ratification, because in art. 2 par. 1 lit. b Vienna Treaty Law Convention the term „approval“ is used in the meaning of ratification.
So the German government had already given, towards the other countries of the eurozone, the impression of a lawful German consent to the EFSF Framework Treaty, before the Green fraction has filed at the 06.07.2010 a draft law consenting to that treaty.
In view of that draft law consenting to the EFSF Framework Treaty, the government has claimed towards the parliament at the 08.07.2010, that the treaty did not need a German ratification. And in no. 1+17 of the conclusions of the Euro Summit of the 26.11.2011, also the German government has confirmed, that the EFSF Framework Treaty does need a ratification, and that Germany had ratified the treaty.
The Prime Ministers have confirmed in no. 1 statement on the Euro Summit of the 26.10.2011, that the EFSF Framework Treaty needs to be ratified.
The then President of the EU Commission, Mr. Jose Manuel Barroso, has confirmed in his speech before the EU Parliament at the 28.09.2011, that the EFSF Framework Treaty requires the ratification, and that the EFSF could use its new powers according to the changed EFSF Framework Treaty not before the ratifications.
Also the Bundesrat (regional house of the German national parliament) has confirmed in no. 4 of its application of the 23.09.2011 (file numbers 369/1/11 (new) and 872/10), that the EFSF Framework Treaty has been in need of ratification.
As the prolog and the epilog and of the Euro Summit of the 09.12.2011 show, even the elevation of the legal rank of EFSF Framework Treaty, ESM Treaty, and Fiscal Compact from a rank of normal international law to the same rank as the TEU and TFEU has been envisaged. Any international law with a legal rank like that of the EU primary law needs in Germany a law consenting to it with even a 2/3 majority (art. 79 Basic Law).
Germany, however, has never concluded a law consenting to the EFSF Framework Treaty. As a result, it has never orderly consented to the EFSF Framework Treaty.
The „Stabilisierungsmechanismusgesetz“ (StabMechG) in Germany has first been concluded at the 21.05. 2010 (file number 17/1685) and then been changed two times. The StabMechG contains the procedure for the Bundestag and focuses on the proce- dure of the Bundestag for the consent to the guarantues with tax payer money for the loans, which the EFSF gives. The StabMechG has been changed two times, but neither the first nor the two changed versions contains any consent to the EFSF Framework Treaty.
The first change of the StabMechG (concluded by the German national parliament at the 29.09.2011 (Bundestag) and the 30.09.2011 (Bundesrat) has adapted the StabMechG because of the changed EFSF Framework Treaty; it has changed i. a. the maximum German guarantuees for the EFSF from 123 billion € to 211.0459 billion € and has expanded in ist art. 1 par. 1+2 StabMechG the scope, for EFSF loans for which purposes the Bundestag can give guarantuees. Also the recommendation of the budgetary committee of the Bundestag of the 22.09.2011 (file number 17/7067) on the draft first change of the StabMechG has explained in its section „B. Lösung“, that the German maximum amount of guarantuees for the EFSF shall be, in order to implement the conclusions of the Prime
Ministers of the 11.03.2011 and of the 21.07.2011, increased from 123.- billion € to 211.0459 billion € – no word about any intention to consent with the StabMechG to the EFSF Framework Treaty. Art. 3 par. 2 of the first changed version of the StabMechG prescribes, for which decisions at the EFSF level the German representative at the EFSF level needs the prior consent of the Bundestag:
- conclusion of any single financial aid of the EFSF
- significant changes of any single financial aid of the EFSF, changes to the total amount ofthe EFSF means and of the German share in them, and changes to the financial instrumentsof the EFSF
- changes of the EFSF Framework Treaty
- transfer of rights and obligations from the EFSF to the ESM
- decision on significant changes of the guidelines of the EFSF directorium
So art. 3 par. 2 no. 3 StabMechG wants to enable a decision by a simple voting to consent to changes of the EFSF Framework Treaty. But according to art. 59 par. 2 Basic Law, Germany can validly consent to international treaties, which intervene into national legislative powers, such as to the EFSF Framework Treaty, only in the orderly form of a law, not in the form of a voting based on a law. The decisive difference is the standard of transparency (as a part of the inviolable structure principle rule of the law). A simple national law needs to be published in the „Bundesgesetzblatt“ (the official public journal, where all laws at the national level in Germany have to be published), in contrast to votings of the Bundestag.That a prescription like art. 3 par. 2 no. 3 StabMechG has been included in the first change of that law, shows already, that Germany had not correctly consented to the first version of the EFSF Framework Treaty, for else such an enabling prescription to consent via a simple voting instead of a law would not have been inserted.
According to no. 17 of the statements on the Euro Summit of the 26.10.2011, also Germany had ratified the EFSF Framework Treaty until that date; but if that was the case, it could only have done invalidly without any consent of the Bundestag or with an invalid consent in the form of a simple voting instead of the form of a law.
The second change of the StabMechG has been made in 2012 after a judgement of the German Constitutional Court from the 28.02.2012, which had demanded to order to better balance the responsibilities of plenum of the Bundestag, of its budgetary committee, and of its special committee regarding those decisions, for which the consent of the Bundestag is needed regarding the EFSF. So art. 3 par. 3 and art. 5 par. 7 StabMechG have been changed accordingly.
That the German Bundestag has never consented validly to the EFSF Framework Treaty, has far- reaching effects on the decisions based on the EFSF Framework Treaty. The German votes in all decisions at the EFSF level, which are based on the EFSF Framework Treaty, have been and are invalid. Since Germany is, according to attachment 1 of the EFSF Framework Treaty, the largest guarantor of the EFSF (with 211,0459 billion €), the incorrect appearance regarding Germany’s seemingly consent to the EFSF Framework Treaty must have had a significant effect on the voting behaviour at the EFSF level of the other countries of the eurozone, as far as they believed erroneously, that Germany had voting rights at the EFSF level, and that it had been bound by the EFSF Framework Treaty to give any guarantuees. Germany is bound to the guaran-tuees for EFSF loans, but only with the power of a simple law at the national level (the StabMechG), but not under international law, because of the non-existence of any valid German consent to the EFSF Framework Treaty.
Particularly those important decisions at the EFSF level, for which unanimity is needed (art. 10 par. 5+7 EFSF Framework Treaty), can only be valid with valid „yes“ votes of the Financial Undersecretaries of all
state parties to the EFSF Framework Treaty.
VIII. Presumption of more powers like those of occupying powers against national constitutions
VIII.1 Conclusions regarding the odiousness and the illegitimateness of the debts
The imposition of a credit condition to change a national constitution without a situation of a lawful occupa- tion according to art. 43 Haague Land Warfare Order as such is already so arbitrary, that it is odious and illegitimate like a colonialist action.
An obligation to entrench in a national constitution the obligation to pay the external debt service preemi- nently before any other expenditures of the state, has a similar effect, as if one put explicitely the basic right to property of the external creditors over any other basic rights of anyone else, even over the life and over the dignity. That is like the entrenchment of a colonialist exploitation in a national constitution.
Basic rights are the most sensible parts of constitutions, even more crucial than democracy. An obligation to throw basic rights as such out of the national constitutions, goes even further. And the J.P. Morgan Bank has demanded that not only regarding Greece, but regarding all countries of the eurozone.
All debts connected to such conditions are obviously odious and illegitimate, as have been the Cuban debts enforced under the Spanish colonial regime.
They are also odious measured at the Tegucigalpa Declaration, because any attack on the basic rights as such is obviously against the people, and it is been tried to coerce them (at least regarding the entrenchment of the blocked account into the constitution) for the benefit of creditor countries and banks and with the support of the IMF.
Those debts are also illegitimate according to the standard set by the Canadian Ecumenical Jubilee Initiative, because an absolute preeminence of the debt service to the external creditors cannot be implemented without harming the population, and such an absolute preeminence is not less inadequate than usurious debt rates.
Measured by the AFRODAD standard, those debts are illegitimate, because they are connected to very inappropriate structural adjustment conditions.
They are also illegitimate measured by the standard of the Jubilee USA Network (for ideological and political reasons rather than to promote development) and by the standard of Jubilee South (without any benefit to the debtor country, and serving as a tool of domination that ensures easy access by creditor nations and institutions to the resources of the South).
Measured at the standard by Joseph Hanlon, they are illegitimate because of unacceptable and inappropriate conditions, because there is nearly no other condition imaginable, which would be more unlawful and inappropriate than the imposition to constitutional changes against the basic rights as such.
Those debts are illegitimate also from the perspective of the standard set by the New Economic Foundation, because conditions to change a constitution to lever out or even to streak out basic rights, is obviously so unreasonable, that it is onerous; and they fall into the category „other illegitimate debts“, because of the similarity to historical debts incurred under colonialist conditions.
All payments, which have been made via the blocked account, even though there have been, from a human rights debt sustainability perspective, more urgent obligations to be paid, have been illegitimate. That applies particularly to the expenditures needed for health (medicaments, health services, enough healthy food, and housing), that have been given via the blocked account to the external creditors instead. And it applies to the credits from the hospital accounts, that have been taken away to fill the blocked account.
The debts to those creditors who have benefitted from such illegitimate preferential payments, have to be reduced by each the same amount, as the illegitimate preferential payment of the respective creditor has been.
In addition to that, it needs to be estimated, how much weigth (expressed in a percentage) the condition to put the blocked account into the Greek constitution has among the total of the conditions imposed via the EFSF, and the Greek debts to the EFSF should be reduced by that percentage.
Regarding the attack by the J.P. Morgan Bank to the national constitutions, further investigation is needed. It needs to be found out, how far the lobbying of that bank to throw out basic rights of workers and basic rights to assembly and to freedom of opinion, has been done. It particularly needs to be investigated, if and in how far that bank has approached any representatives of the Troika or of the member states to impose such conditions, or to deliberately break open the national constitutions that way.
The results of such an investigation should determine an appropriate amount of cancellation of the debts to that bank, not only of the Greek debts, but of the debts of all countries of the eurozone to it, because already the demands against the basic rights in its paper „The eurozone adjustment – about halfway there“ are an odious abuse of its power as a big creditor.
VIII.2. J.P. Morgan turning against the national Constitutions
The J. P. Morgan Chase Bank is, is measured according to the balance, the biggest bank of the USA. It has been built, i. a., from the Chemical Bank, the Chase Bank of the Rockefellers, the Manhattan Bank of the Warburgs, and the J.P. Morgan Bank. http://de.wikipedia.org/wiki/JP_Morgan_Chase
An attitude of that bank, to impose conditions on states, might particularly have been supported by the tradition of the IMF already in the 1980ies, which has been exposed by the economist and former IMF employee Davison Budhoo, to add to its own conditions towards states wishes of big banks, where US American big banks, because of their geographical vicinity to the IMF, probably have had the easiest access (see also section V.7.4 of this submission).
Besides that, the crucial role of J.P. Morgan regarding the founding of the current US issuing bank Federal Reserve in 1913, and the connection via the Rockefellers to the Bilderberg network might have contributed to such an attitude.
In addition to that, one has to take it for serious, if the J.P. Morgan bank publishes demands in connection with the eurozone, which are directed against the basic rights themselves. Because according to Prof. Dr. Anthony Sutton’s book „Wallstreet und der Aufstieg Hitlers“ (Perseus publishing house), J.P. Morgan has made profits from the Second World War via General Motors, which holds shares at the then German tank producer Opel. Rockefeller’s oil firm Standard Oil has unexpensively given to the IG Farben a patent for the production of fuel out of coal, without which the German army would not have had enough fuel for the WW II, securing huge profits for the IG Farben. The IG Farben has also been the main economical profiteur from the concentration camps, has been the decisive economical driver of the speeding up of the holocaust.. Two members of the Warburg family (Paul und Max Warburg) have been involved in leading positions of the IG Farben. According to page 41 of Prof. Dr. Sutton’s book, the later Prince Bernhard of the Netherlands (and long-time chairman of the Bilderberg cartel) has been an IG Farben lobbyist.
In its paper „The Euro area adjustment: about halfway there“ of the 28.05.2013, the J. P. Morgan Bank shows some quite radical expectations regarding Germany and regarding some states in Southern Europe. http://culturaliberta.files.wordpress.com/2013/06/the-euro-area-adjustment-about-halfway-there.pdf
The bank criticizes in its paper „national legacy problems“ and means by that term constitutional and political rules, which it regards at impediments for a further European integration. It demands / recommends changes to national constitutions. In the section „The journey to national political reform“ of its paper, the J.P. Morgan Bank speaks about „deep seated political problems“, which included, i. a. „weak executives; weak central states relative to regions; constitutional protection of labour rights; consensus building mechanisms which foster political clientalism; and the right to protest if unwelcome changes are made to the political status quo.“ It states, that the „shortcomings of this political legacy have been revealed by the crisis“.
The Portugese constitution contains more basic rights for workers than many other national constitutions at Europe. And Portugal has a couraugeous Constitutional Court. So the lobbying of the J. P. Morgan Bank seems to aim at basic rights of workers and to assembly of the constitutions of all countries of the eurozone, and of Portugal in particular.
A further demand of J. P. Morgan are eurobonds, meaning the liability of all states of the eurozone as joint debtors for each the bonds of all other states of the eurozone (p. 15). J. P. Morgan claims the German policy for itself with the presumption, that, German politicians would presumably consent to a „fiscal union“ with eurobonds only connected with significant changes of the Constitutions of the EU member states in the periphery („a significant change in political constitutions around the periphery“).
Most shocking for the German population is, how and with which degree of conviction J. P. Morgan regards the treatment of Germany with its Basic Law. According to par. 2 at page 1 of the paper, J. P. Morgan says:
„It is critical to understand that Germany’s approach – and Germany is largely determining how the crisis is being managed – is that national legacy problems have to be sorted out at the national level before further steps of integration – which involve meaningful amounts of risk and burden sharing – can be taken.“
Also in the first paragraph of the section „The macro consequences of crisis management“ at page 13, J. P. Morgan claims, that „national legacy problems“ have be solved at the national level before further steps of integration.
Thus, the J. P. Morgan Bank has presumed, as if it was the most natural thing of the world, that the German Constitutional Court was going to simply sort out any problems with the German Basic Law. The paper of J. P. Morgan does not explain, what is their imagination of sorting out. Breaking open the Basic Law? Ignoring most structural principles, basic rights, and human rights ? Who or what has made J.P. Morgan so confident already at the 28.05.2013, that those basic rights (or the application of them in relation to the EU law?), which are unconfortable to that bank, would be removed?
That a bank like J.P. Morgan feels strong enough even to openly lobby for throwing important basic rights out of national constitutions supports the impression, that banks might also have contributed to the content of draft credit conditions imposed on Greece.
VIII.3 Blocked account and constitutional changes ordered by credit conditions
At p. 45 + 165 of the memorandums of understanding of March 2012, the introduction of a blocked account (there called „segregated account“) is imposed. This is used to pay the debts preeminently in comparison to all other expenditures of the state. For this purpose, the Greek government has been obliged to pay in advance onto the blocked account the amount, which is needed for the respective quarter.
According to the Hellas Frappe article „How Venizelos Robbed State Institutions To Complete Bond Swap“ of the 26.03.2012, even credits from banking accounts of publichospitals have been used to fill that blocked account for the first time. http://hellasfrappe.blogspot.gr/2012/03/how-venizelos-regime-robbed-state.html
In addition to that, the memorandum of understanding of March 2012 states, that the Greek government wants to entrench the preeminence of the debt service in the Greek constitution as soon as possible. The memorandum of understandig says, that the Spanish constitution recently (from the view of March 2012) has been changed correspondingly.
The Eurogroup has, according to the last sentence of its statement of the 21.02.2012, which is quoted at p. 6 of the memorandum of understanding of March 2012, welcomed the intention of Greece to legally entrench the preeminence of the debt service.
If one reads only the memorandum of understanding of March 2012, one could get the impression, that it was originally an initiative of the Greek government.
In view of the preeminent payment of the creditors, the German Chancellor Dr. Angela Merkel and the then French President, His Excellency, Mr. Nicolas Sarkozy, have demanded from Greece, to direct the revenues for this purpose onto a blocked account (taz article „Sonderkonto statt Sparkommissar“ („special account instead of austerity commissioner“) of the 07.02.2012) www.taz.de/1/digitaz/artikel/&ressort=wu&dig=2012%2F02%2F07%2Fa0080&cHash…
According to the taz article „Rettung mit vielen Fragezeichen“ („rescue with many question marks“) of the 21.02.2012, especially the German federal government is said to be urged for the blocked account. www.taz.de/1/digitaz/artikel/&ressort=wu&dig=2012%2F02%2F21%2Fa0067&cHash…
The taz article „Der Pleitegeier kreist weiter“ („the vulture circles further“) of the 10.02.2012, in addition to that, states more precisely, that the blocked account has the aim, that the revenues of Greece go preeminently to the creditors of the state. www.taz.de/1/digitaz/artikel/&ressort=wu&dig=2012%2F02%2F13%2Fa0070&cHash…
The article of the Deutsche Mittelstandsnachrichten of the 22.02.2012 „Peinlicher Fehler der EU: Griechen-Verfassung kann erst 2013 geändert werden“ („painful mistake of the EU: Greek constitution cannot be changed before 2013“) exposes, that the Troika has demanded from Greece, to entrench into its constitution, that the debts of the Greek state have to be paid preeminently before any other obligations.
According to the article „Griechenland muss auch selbst für den Bailout bezahlen“ („Also Greece itself has to pay for the bailout“) of the 23.02.2012 of the Deutsche Mittelstandsnachrichten, the Troika has demanded from Greece the introduction of the blocked account. http://www.deutsche-mittelstands-nachrichten.de/2012/02/38676
At the 24.02.2012, the conditions for the bailout of the 22.02.2012 have been presented to the Bundestag (lower house of the German parliament) because of the dependency of the German guarantuees on parliamentary approval (file number 17/8731). Under this file number are 736 pages in German and English language with the official conditions including the financial support and the draconian conditions of the EFSF against the Greeks, among them on page 704 in German language under no „4.1 von dem begünstigten Mitgliedsstaat vereinnahmte Beträge“ („figures collected by the of the beneficiary member states“) also the imposition of the blocked account.
As far as I know, the entrenchment of the blocked account respectively of the preeminent payment of the external debts into the Greek constitution has not yet been done, because the Greek constitution prescribes a minimum period between changes of the constitution, but had been planned still for 2013.
Already the attempt to force Greece to a change of its constitution, is incompatible with the structure securing clause of art. 4 TEU, because the obligation of the EU from art. 4 TEU to respect the „national identities“ and the „fundamental structures“ of the member states means, according to the Lisbon judgement of the German Constitutional Court of the 30.06.2009, especially the obligation of the EU to respect the constitutional identities of the member states. The English translation of the Lisbon judgement is at the link: http://www.bundesverfassungsgericht.de/entscheidungen/es20090630_2bve008209en.html
It is even more unbelievable to impose changes of the constitution via the EFSF and so on the basis of the EFSF Framework Treaty, which is outside the EU law and has, as a result, obviously only a rank of simple international law.
Even if Greece was militarily occupied, an occupying power would be entitled to impose changes of the constitution only as far, as it is necessary for the reconstruction of the order (art. 43 Haague Land Warfare Order). In view of Greece, however the case is obviously in no way comparable to art. 43 Hague Land Warfare Order, so that such interventions into the Greek constitution cannot be legal, as it could be legal within a legally occupied country. So the enforcement of a change of the constitution via a mecha-nism under international law is obviously unlawful because of the violation of the sovereignty of the states (art. 2 par. 1 UN Charter) and of the human right of the peoples to self-determination (art. 1 UN Social Pact, art. 1 UN Civil Pact). The universal human right to the political self-determination of the peoples does not provide for any restriction by means of international economical agreements, and into the right to the econo-mical self-determination of the peoples may, even within the scope of international economical agreements, be intervened only insofar, that the means of existence of the peoples are not touched.
In view of the various obligations under international law, the preeminence of the national constitutions and the deliberate, not enforced via loan conditions, decision on changes of the constitution, are the core of the sovereignty of the states and of the right to the political self- determination of the peoples.
In addition to that, the constitutional change, which is being enforced upon the Greeks, forces them to put the service to the external debts unconditionally above even vital expenditures for their own population, an obvious unlawful intervention into the means of existence (art. 1 UN Social Pact, art. 1 UN Civil Pact) of the Greek people, and a decisive levering-out of the protection of the Greek people, which they have under their constitution and under the universal human rights.
Sarah Luzia Hassel-Reusing