Debate about the crisis: people can reject IMF because there are alternatives

Written by The Week com Helena de Carvalho e Nelson Peralta, 07/05/2011

Foto by Nelson Peralta

International debate promoted by Left Block and GUE/NGL, Unitarian Left at the European Parliament, demonstrating in Lisbon that the presupposes basing the combat to this crisis, imposed by IMF, are false, that the rescue conditions determined to Portugal will aggravate even more social and economic problems in the country and will benefice the same, and that alternatives do exist outside the measures being demanded. Confirming that the EU is in fact “in route of divergence”, the interventions of Benjamin Coriat, Francisco Louçã, Elias Jon, Marisa Matias and Miguel Portas, punctuated by several participations from the audience, stressed not being the IMF the way, there are serious and credible alternatives to overcome social and economic problems. So, Miguel Portas stressed at the end of the session, Portugal elections represent the possibility of rejecting the foreign rescue accepted by three Portuguese parties, once, as in Iceland– although the differences – people can day no as protagonists of history and masters of their sovereignty.

Benjamin Coriat, French researcher and one of main subscribers of the Manifesto of Terrified Economists started to dismantle a myth. “Stability Pact has no economic reason to impose a deficit of three percent of the GNP; this makes no sense in economy”.

French economy integrated this concept in an intervention where he enumerated and explain, one by one, the failures in the European construction focusing in detail in the “deepening of inequalities between countries and the role of "virtuous" Germany in this situation”.

“How can Germany be virtuous and can give us lessons after had bough East Germany in the nineties, creating an economic recession, leveling down the wages of workers and winning in competitive, exploding the interest rates and had obliged all other European countries to pay the costs?’, questioned Coriat.

Next he dismantled another myth based in propaganda and demands imposed by the European Commission and IMF solutions.

“It is false that the States have excess spending”, he said. “The States do not spend that much and sometimes even spend less. What happened was a fiscal counter-revolution that destroyed the States revenues. The States each time give more gift to the rich and to the capital incomes”.

And he quoted some examples. In France, he said, the equivalent to the IRC is 34 percent by the listed companies in the CAC 40 index only pay eight percent, benefiting from a non existent common fiscal policy in the EU and also form tax evasion; in Ireland, the companies taxes have descended from 50 to 12,5 percent.

Miguel Portas would later come to quote Portugal’s case where banks with four million euros of income per day, paid about 4,3 percent of taxes in 2009.

After underlining the Greek case as an example of “punishment”, Benjamin Coriat said that in relation to the future we face two scenarios: either more of the same or an alternative way out.

For the alternative exit he proposed three orientations.

Break with financial markets, imposing “conducting audits to public debts so that can be identified who owes and what owes and so we would see that after all creditors have to pay more than borrowers”.

A second orientation: “European Central Bank must buy government bonds on the primary market in order to lower interest rates and leave out of the game the rating agencies”. This would be accompanied by establishing a fair and balanced tax base in order to "reverse the counter-revolution. "

A third orientation would be the establishing of a macro-economic coordination in Europe towards achieving a balance between the center and the periphery because “Germany can not only take the benefices of Europe and leave the disadvantages to the others”, Benjamin Coriat wrapped.

Francisco Louçã spoke about he agreement imposed by the troika to the Portuguese government and the parties that subscribed it in the frame of a “infernal vicious circle” where all the programmed measures make even more difficult to the economy to respond to structural questions like unemployment, inequalities, retraction in the consume.

"At the end of implementing this program, Portugal will be poorer and indebted, all the problems will become more difficult”, said the Left Block coordinator.

“European Union pushed Europe’s economies to the pitfalls of financial speculation” and “who benefices with all this is another troika: that of banks, insurance companies and financial funds”.

Francisco Louçã called attention also to the “ambiguities and mysteries” of the IMF agreement at the fiscal level speaking of the indictors that the patronage will benefice of a 3 percent reduction in social security contributions, in exchange for an increasing of three percent of fiscal charge, probably including the VTA. This is, the all population – including workers, pensioners, retired – might have to pay through the consumption what the patronage will be exempt to pay for the social security.

“To call fiscal neutrality to such measures is an insult to the Portuguese people’s intelligence”, said Francisco Louçã, that defended the renegotiation of the debt and the audit of public debt.

Elias Jon, leader of the Iceland party Green Left, made a history of the all process in his country run by right-wing policies in coordination with the IMF and that culminated in bankruptcy of the banks. He explained that the people refuses to pay for the banks mismanagement and that the government, from the right, had no chance to help the banks in 2008 (although they wish to) because their privatization in 2003 gave to banks sector a ten times bigger dimension that the Iceland’s GDP.

The people’s refusal to pay for the banks mistakes forced the fall from the right-wing government, its substitution for a majority formed by left –wing organizations that now negotiates a social pact and proposed to raise public investment to create employment, support social security and invest in education.

Miguel Portas signaled the participants convergence in the debate when discussing the situation diagnosis and quoted a study, done by economists, according to which Portugal is now the more unequal country in Europe, only surpassed by Lithuania and Latvia. The inequality is if one to 18 between the poorest and the richer sectors, being included in these ones salaries of 2500 euros, which bears witness to how low are the incomes of the most disadvantaged.

The rescue, said Miguel Portas, aggravates all that is already being difficult in Portugal. Provokes a real salary reduction, decrease in purchasing power, attacks on all workers rights, aggravates the deindustrialization, will lead to more unemployment and will not even answer to the financing necessities of the Portuguese State.

As well as other speakers, the MEP quoted the Greek example, where one year after the IMF measures were applied the social conditions are worse at a dramatic level, and even so, the debt has increased from 115 per cent of the GDP to 145 percent, which leads Athens to consider the possibility of abandoning the Euro.

However, Miguel Portas added, we do not see in the European Union any intention of changing the monetary policy because that is the Germany’s advantage.

In order to illustrate how the rescue will not even resolve the Portuguese State financing problems, Miguel Portas, rotted the fates of the 78 billion euro loan: 54 billion will be to fulfill the State financing obligation until 2013, that is giving back what is being lent to us; 12 billion will be to recapitalize the banks. “That is”, said the MEP, “66 billion will be destined to the same, because the creditors and the bankers are the same”. 12 billion are left: “These are the room for what will go wrong for all the reasons which have been said”.

Miguel Portas stressed also “the paradox” of this measures being decided in Brussels by conservatives sectors and being applied in the periphery “by socialist parties that reclaim for themselves the social State and act against the social State”. “This rescue” he added “has also a political condition: next government has a program and will have to be constituted by two or three parties”- that already accepted the foreign impositions.

So, Miguel Portas said, in the elections of June 5^th besides voting in parties we also will choose between accepting or rejecting this rescue. The credible alternatives exist, he stressed, and despite the conditions are difference the "no" from the Icelandic people is an example "of how people are sovereign and actors of history. "