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It is possible to refuse illegitimate debt! Recent examples of the Argentina, the Ecuador and the Iceland

Chiara Filoni

Global Research, September 01, 2014

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Article published in a special issue on the debt of Bruxelles Laïque

The debt increased sharply in Europe since 2007-2008, it is a fact. European Governments have failed to manage this crisis caused by the behaviour of the banks, they have even worse it is another fact.

This is not the first, and by far, that their States and peoples face a debt crisis. However, solutions that do not endangered the fundamental rights of peoples have been found, and in many cases. Without going back to the time of the Kings and the tzars (which have been many to cancel their debts to their creditors when necessary).1|, look at the recent history: between 1946 and today it y had 169 cases of suspension of payment for periods that have varied from 3 to 5 years. |2|

Examples of the Argentina, the Ecuador and Iceland proposed here represent only the latest experiences of cancellation of debts in history, each with its interests and its limits.


It is the largest suspension of payment in history. End of 2001, the Argentina has suspended payment of its debt for an amount of $ 90 billion. North American, Italian and German banks held the largest part of this debt securities sold on the financial market.

After decades of neoliberal policies and structural adjustment plans imposed by the IMF and three years of harsh economic recession, the Argentine people decided to rebel against the dictates of international financial institutions and to take to the streets. It is the political crisis. Five president succeed one another in a few weeks and the fifth, under pressure from the street, said the suspension of payment, despite external pressures.

The year 2002 known of great turmoil, with among others a certain closure of opportunities abroad. But the Argentina managed to save with money who breaks free from the suspension of payment of the public debt. From 2003 to 2009, the Argentina recorded a growth rate of 7-9%. But other policies and virtuous circles also went on the road, first recovery of some companies (even large) by workers, following the abandonment by the owners.

Unfortunately, what the Argentina has really done is negotiation with its international creditors more than its debt. The country had proposed a (exemption) discount of $ 65 on every title of its public debt by paying $ 35 instead of $ 100, discount that was accepted by most of the bankers of the time who could no longer sell these titles for a good price on the secondary market. |3. 76% of the titles were then changed in these terms, still allowing a reduction of 2/3 of the debt.

It should be noted that a real unilateral suspension occurred at the same time: from end of 2001 the Argentina has more paid its debt to the Paris Club (cartel of industrialized creditors). It speaks little, or no, but it’s a genuine unilateral sovereign decision to primer the social and economic rights of the Argentine people on the rights of the creditors.


Another case, in some ways more interesting, is that of the Ecuador. Rafael Correa was elected President of the Ecuadorian Republic end of 2006 with a program based, inter alia, on the disobedience to international financial institutions and on a solution for the debt accumulated during the dictatorial regime and its increase without end immediately its administration indeed initiated an audit of public debt of the country over the period from 1976 to 2006. This audit was conducted by a panel of 18 experts including the CADTM and other local and foreign civil society organizations. After 14 months of work, after having peeled tens of thousands of records and hundreds of contracts, the audit commission has given its opinion and said 85% of internal and external debt as illegitimate. It was from public debt securities coming due between 2012 and 2030, for a total amount of 3.230 million.

This sovereign unilateral act has caused reactions on the part creditors, for most North American banks. After threatening the country (as in the case of the Argentina) with all the means in their provisions, including media, they began to sell their securities markets to 20% of their value. Finally, the Government of Ecuador came to discreetly buy 91% of the securities for a total amount of $ 900 million. Making, taking into account the capital stock bought at low prices but also the interests that would be paid until 2030, a saving of almost $ 7 billion. This has allowed to pass the debt of 32% to 15% of the budget and social spending from 12% to 25%… and thus significantly improve the living conditions of the population. |4|


Through Europe, the case of the Iceland made a lot of noise, and for cause. The country has seen collapsing its banks in 2008 (at the same time as the collapse of Lehman Brothers in the United States or Belgian or Irish banks). Their accumulated debt were 10 times the the country’s GDP. The State did not have the means to bail out them, the IMF intervened in awarding a $ 2.1 billion loan to Iceland in Exchange – for change – a cure of austerity.

Meanwhile, the Government has blocked the movement of capital in the country, and the United Kingdom and the Netherlands demanded to the Iceland she reimburses the 3.9 billion euros that it themselves had reached to secure deposits of their customers citizens of the Icesave Bank.
The Icelandic population, by learning the negotiations underway between their country and the United Kingdom and the Netherlands, dropped in the street to say no to the socialization of private debt of banks. It took two referendums to reject this policy, but the people won. On this point, in any case.


These three examples should not be considered as models, but as tracks which many countries could use rather than blindly follow policy austeritaire…
The three countries continue to pursue neoliberal policies, more or less as the case may be. The economies of the Ecuador and the Argentina remain based on an extractiviste-exporter model capitalist nature, which is ruining the virtuous circle began not refusal of payment of their debts. In the case of the Iceland, even though this unpayable debt was denied, the country has still applied the measures promoted by the IMF.

Despite all these limitations, these examples show that it is quite possible to refuse to pay the debt and is not the chaos that followed, although on the contrary. With, in the case of the Ecuador a decision to begin a process of audit to identify illegitimate part of the debt that could be repeated in many countries, including the Greece. For the CADTM, a illegitimate or odious debt, or any other debt that prevents the State to meet its obligations towards its population, should in no case because be paid according to the same principles of international law, because it does not benefit the interests of the people but to the interests of a very small minority of holders of capital.

Finally, the cancellation of the public debt is a measure which must be accompanied by other complementary and all also radical measures (such as the socialization of the banking sector, a tax revolution, etc.).

Many initiatives of citizen audit of the debt began to be born in Europe (with the ICAN network: « International Citizen debt Audit Network). In Belgium, an ‘Acid’ audit platform was created a little over a year ago and now has a dozen local groups, as well as some 30 organizations members. Feel free to join and to talk about the debt around you! Only a sufficient mobilization on the part of the population is likely to change the ratio of current force between banks and populations.

Chiara Filoni


|1. Eric Toussaint, « series: the cancellation of debt in history », http://cadtm.org/La-longue-tradition-des

|2. Eric Toussaint, « Argentina, Ecuador and Iceland: solutions to the crisis of debt for the European Union? », Video: http://w41k.com/80011

|3. Others have formed in « Fund vultures » lying around the Argentina in all courts and with all possible methods to make him pay his debt at par value (or even with interest for late payment).

|4. Eric Toussaint, « three examples of suspension and audit ».

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