Is Greek Debt ‘Illegitimate’?

As we watch the Greek people fighting for their very survival, their newly elected government is testing every avenue to ensure the country and its people do not go under. This monstrous situation is outrageously unbalanced, as the Greek people suffer untold hardship whilst the banks seem to remain in an unassailable position, after irresponsible moneylending which is supported by Brussels.

However, there is a glimmer of light, with precedents which may offer a positive way forward.

Could their impossible financial burden be classed as ‘Odious Debt’?

“In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

Alexander Nahum Sack formalised the doctrine of odious debt in 1927 as follows:

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 lenders’ knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed 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”. (Source Wikipedia) – Underlining by me.

Sack based his doctrine upon the earlier repudiation by Mexico of debts incurred by the deposed Emperor Maximillian and similar action by the US when it took Cuba under its wing by repudiating the debts that country had incurred from Spain.

An earlier precedent and of greater magnitude was created at the end of WW1 when the allied forces reduced Germany to servitude for a generation, degrading the lives of millions of people. John Maynard Keynes wrote contemptuously about this policy and 20 years later the debt was repudiated but only after becoming one of the primary driving forces for the rise of the Nazi party.

These precedents now have the Greek government looking into the whole question of the circumstances surrounding the signing of the country’s two bail out agreements that led to the implementation of austerity measures. Should they come to the conclusion that this may be interpreted as odious debt then the burden for repayment would be passed from the Greek people and onto the backs of the ministers of the previous government.

Whilst the troika are infuriated at this development, it does pose a far more reaching question as to whether the many other heavily indebted countries around the world might be motivated to follow Greece’s example. Certainly there is growing global unrest at the seemingly unending enslavement of people to debt by austerity, a situation they are now able to share with each other across social media.

It should also be remembered that the harsh attitude by lenders towards Greece is not dissimilar to that demonstrated by the allied powers mentioned earlier and their severe action led to the birthing of one of the most abominable dictatorships and retaliatory actions in the history of the modern world.

Certainly the international banking cartel is now under attack from many different directions, as alternative banking systems are proposed from both Latin America and China, the latter already receiving international support. If we add to this the development of virtual currencies, the old order will struggle to maintain its previous monopoly.

Maybe that is no bad thing given its abusive management of the financial system and the trillions it has printed since the 2008 financial collapse, which have bypassed Society and gone directly to its banks as cheap loans, rather than writing off odious debt.

Greece could provide the catalyst for a turning point in our current toleration of global finances and debt . . . I, for one, hope so.

Until the next time


Thinking from his Book: Global Magna Carta. Returning Power to the 99% . . . If They Want It! By J T Coombes