Greece Debt Measures and Us,
A View from Africa
Gabriel C Banda
THE recent situation of Greece and the referendum on further austerity measures for further lending by IMF and Europe governments is a major development in economic relations and, generally, human relations in the world.
Greece’s government and many in the population felt that the measures imposed by Greece’s lenders and anchored by the International Monetary Fund, IMF, were too strong and brought about great hardship.
In the five years of austerity measures imposed by lenders, unemployment increased, incomes were reduced, access to basics was reduced, and, for many persons, hardship set in. The young, the pensioners, whose incomes were reduced, and others in society have been greatly hit.
The IMF and European lenders insisted on harsh measures before Greece can get more loans to help overcome the harsh economic situation, much of the situation brought about by the loan conditions imposed by the lenders.
The government of Prime Minister Alexis Tsipras, with his passionate finance minister Yanis Varoufakis, put to a national referendum the question of going through further harsh economic measures. The result has been a big “No.” Most people in Greece do not want the harsh measures.
Now, some officials from the lenders are upset with the Tsipras administration while some officials reluctantly say they recognise that the No had expressed democratic voice but it may not be easy to work on different measures. What has followed is Greece’s government and lenders sizing each other to have their way.
Greece is saying they will only agree to some reforms that are socially fair, healthy, and sustainable. They do not want the destructive economic policies that have greatly impacted their society and other people.
However, many officials from the lenders have continued saying there is no alternative to the harsh measures. Some even bring out their personal stereotype negative attitudes towards Greek persons. They consider Greece a burden that may need to be dropped.
In the negotiations that cannot be avoided, both sides will bring out various tactics and dynamics. Both Tsipras and lenders will be sizing up, reacting, and playing to each others’ positions while also considering the positions and attitudes of their populations.
Greece and Unlikely Exit
However, it will involve a lot of adjustments if Greece ends up leaving the Eurozone, and possibly the European Union. The lenders should not be in denial and cheat themselves into believing that a Greece exit will have minor effect on the Eurozone and the European Union. They should also think about NATO. Economies and people in the region and beyond will be greatly affected.
Actually, I believe it is not in the interest of the lenders to have Greece exit its common monetary bonds with other Europeans. Many things unknown will come into play, affecting the other Eurozone and European Union members. Already, the position amongst the creditors’ bloc is not unanimous. Some are concerned about Greece possibly falling away, something they would not like, and are prepared to come to some settlement with Alexis Tsipras and team.
But the current standoff involving IMF, lenders, and borrowers is not new. At various stages of their debt relationship, from the time of negotiation for first lending to implementation and review for further loans, IMF and lenders have applied pressure on needy borrowing governments.
What IMF and lenders are doing over Greece is consistent with their bullying actions on governments in Africa, Asia, Latin America, and other places. What is significant is Greece standing up to IMF and creditors and refusing to bow to pressure for further destructive conditions.
This Greece position of courage and bravery is significant not because others before them have unwillingly followed IMF, but because the sanctions and consequences imposed on dissenting governments by the consortium of IMF, World Bank, and lenders have been harsh and meant to make governments yield even when it is known the imposed measures have been very destructive.
IMF and Zambia
Another case of standing up to IMF, World Bank, and lenders happened in Zambia in May 1987. President Kenneth Kaunda announced that the IMF and World Bank “Structural Adjustment Programme,” SAP, measures had brought deep suffering to the population. He said Zambia was breaking off from the programme while retaining membership of the IMF organisation. He said Zambia would still service its debt, but in a manageable way that did not bring great social hardship.
From imposition of the austerity measures, suffering of Zambia’s people had even increased. The society was unstable. Zambia had reduced gains made from independence in 1964 in fields like health, education, and access to basic needs. Life expectancy fell. Infant mortality increased. Maternal mortality increased. Malnutrition increased. Deaths increased. Zambia’s capacity in many fields was declining. Structural Adjustment was a killer. In fact, in 1986, there had been riots over food when IMF and World Bank economic measures, imposed to service debt and reduce budget deficit, reduced people’s quality of life and access to basic needs.
Back to that time in May 1987, Dr Kaunda said Zambia would cut off from the IMF programme and implement its own that would lead to growth. Local economists, advisors, and persons from various sectors got involved in making the home-grown programme. When it was implemented, Zambia recorded some growth.
But the IMF and World Bank took on some position of ensuring that Zambia would be put under great economic pressure and get back to an IMF programme. IMF and World Bank acted with other governments to put economic sanctions against Zambia. Even governments that were friends to Dr Kaunda and Zambia abandoned the African government and fell in line with the IMF sanctions position. Even respected Gro Harlem Bruntland’s Norway administration acted with IMF and World Bank against Zambia’s position of abandoning harsh Structural Adjustment measures.
Kenneth Kaunda’s government was isolated. Many rulers of governments, sympathetic to fellow governments undergoing harsh economic measures, are silent. They fear receiving collateral economic pressure on them, with that pressure leading to unrest and removal of their governments from office.
In this inter-dependent world, no government or society can live without the support and collaboration of others in the world.Eventually, without practical support from friends who may have been sympathetic but fearing to oppose IMF and World Bank, in order to survive, Zambia was forced to get back to some IMF and World Bank programme. In June 1990, under continued economic austerity, further riots took place, leading to an unsuccessful coup attempt.
Integrity of Life
In many places, SAP and austerity conditions have acted against peace and stability. The austerity conditions fight the integrity of humanity and life itself. The programmes to be followed were harsh. The debt service interests, ratios, amounts, and other conditions were unfair. Many people have suffered and died from IMF programmes. The austerity programmes lay seeds of discord and violence.
People have reacted through protests and violence. Protests and unrest have happened in Africa, Asia, Latin America, and even Europe. Many in Zambia, Africa, and elsewhere have died from protests against governments and harsh economic conditions.
When things do not work out or have created further problems, IMF says the medicine is still on its way to working, that there was light at the end of the hardship tunnel, or that instructions have not been well followed by the government. They turn around and make the governments take the blame.
Due to the harsh austerity conditions, some governments are voted out by their citizens. The new government, often by those who were critical of the conditions brought about by harsh measures, ends up also following the IMF and creditor conditions. Complaints continue while IMF watches in the background, shielded from their contribution to the situation of hardship.
Referendum has Worked
Thus, Greece’s current situation is interesting for the whole world. It is a landmark for debt and financial relations involving governments and lenders, multilateral or individual governments. Greece getting a fair deal, that allows a programme to be done with minimal impact on members of the public, especially the vulnerable ones, will encourage others to also be courageous and decline or renegotiate IMF and creditors’ conditions.
In many ways, Greece has won some renegotiation. The referendum of 2015 has worked. Of course, IMF and the creditors will try to show that the lenders are in control of the situation and are continuing to push Greece to debt service and restructuring. But the reality is that Alexis Tsipras, Yanis Varoufakis, their team, and the people of Greece have won the advance towards renegotiation of the loan and debt conditions.
Used to bullying and twisting others, IMF and creditors had not expected the referendum tool to come up. When it did, they were wishing, against reality, that Alexis Tsipras would be shown to be unreasonable. Media said there was a tie between Yes and No support while the truth was that an overwhelming number of persons was against the measures.
The referendum tactic worked well. Alexis Tsipras and Yanis Varoufakis showed that they had significant numbers of their fellow citizens behind them. They show that even when abandoned by IMF and the Eurozone system, Greece will for some time receive the support of its public in other alternative programmes that may be embarked upon. Public support is important for any political or economic decision.
Most people in Greece had experienced so much hardship that they were prepared to endure the consequences of creditors’ sanctions than continue suffering. It is better to suffer and assert your human dignity than to continue being enslaved.
In other countries facing harsh IMF conditions, there has been no referendum on whether to follow or continue with IMF programmes. The programmes to be followed were harsh.
Greece Turning Point
The Greece experience of 2015 should mark some turning point in IMF, World Bank, lenders, and borrowing governments. The experience shows that it is possible, as Dr Kaunda did in 1987, to stand up to the bullying and thug behaviour of IMF and World Bank. Further, it is possible to get citizens openly participate in the decision about the way forward. With people’s voices openly registered and measured, the IMF and World Bank will fail the moral test.
The IMF and World Bank have been like Shakespeare’s Shylock. Shylock wanted to cut a pound of flesh, as agreed, from his defaulting debtor. But the problem was that cutting the pound of flesh was going to make the debtor lose blood. Blood had not been written into the loan and debt service contract. It was thus difficult to implement the pay back of flesh. But the history of IMF, World Bank, and some lenders has been that of cutting flesh with the blood in it. Societies have suffered.
Many societies of Africa are still handicapped by the forced IMF and World Bank measures of the 1980s and 1990s. The societies would have been stronger had they not been shaken down by the economic measures.
The frustration and even annoyance with which some creditor officials have in recent days responded to Greece people’s majority choice for “No” about continuation of austerities is example, though mild one, of how IMF and lenders have responded to Africa’s governments.
There are similar tactics of using a stick to try to bring governments back in line to the harsh policies and conditions the lenders, falsely or by error, say have no alternatives. IMF and creditors impose harsh measures. Then they insist on continuation of harsh programmes even when there is decline in quality of life.
They continue to say the harsh medicine is path to recovery. They punish governments refusing to further punish their people, punish them by refusing further funding.
The IMF and creditors will also make lenders and non-lenders not to do businesses with the dissenting borrower. IMF and lenders act as consortium and cartel imposing sanctions on some dissenting government.
SAP works through dictatorship. SAP is dictatorship. SAP has been imposed through the dictatorship of the IMF and World Bank against unwilling governments and peoples. IMF officials impose harsh measures against fellow human beings who are considered objects. One is not sure the IMF officials themselves can comfortably live under the conditions they subject their fellow brothers and sisters in many parts of the world.
Actually, there ARE alternatives to IMF programmes. Saying “there is no alternative” is narrowness and blocking creativity in self and others. It acts against the possibilities and progress of humanity. Currently, in Britain, the Conservative government, with a huge budget deficit, a deficit bigger than Greece and other European governments added on, is thinking of budget cuts for some items but, wisely, will not touch health and education.
Governments of Africa and other places were forced to cut spending on essentials, including food, education, health, and other basics. This contributed to capacity difficulties whose effects are still with us now and societies are still to recover from.
The Greece referendum of 2015 reminds us that economic austerity measures mainly work through imposition and dictatorship. In many countries, put to some vote, the measures would have been rejected. IMF and World Bank would have been forced to support more sustainable alternatives.
The Greece debt situation also reminds us that governments can be strong. Factors at hand will move towards some settlement between Greece and creditors. That will be healthy for all parties involved.
From the Greece experience of 2015, IMF and Company will now fear that other governments will follow Greece and now start invoking referenda. Should this not be some fair direction in democracy and governance by consent and participation? For instance, if it seems very contentious, shouldn’t people in other European societies have the right to vote on whether there should be landmark cuts on social welfare?
The IMF and creditors should also remember that now there are other significant governments and organisations that provide grants and loans at fair conditions. The current Greece debt situation shows us that the IMF, World Bank, and other creditors can no longer continue to intimidate and coerce governments and societies of the world. Shylock does not always win.
Contact email: email@example.com
Based in Lusaka, Zambia, the author is involved in writing and the arts, social development, and peace issues. He holds an MA in Peace Studies, University of Bradford.
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GCB, June/July 08th, 2015