Unmasking the bondholders: The audit of Ireland’s new ‘national’ debt

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On Easter Monday, the Irish peace, justice and human rights advocacy group Afri launched a satirical version of the 1916 Proclamation at Arbour Hill cemetery, where the leaders of the Easter Rising are buried.

Actor and writer Donal O’Kelly read out the new proclamation on behalf of the bondholders to whom Irish people’s money has been pledged through the bank guarantee:

We declare the right of senior bondholders to the ownership of Ireland, and to the unfettered control of Irish destinies, to be sovereign and indefeasible. The long usurpation of that right by the Irish people and government has not extinguished the right, nor can it ever be extinguished except by their repudiation of the bank debt…. The senior bondholders are entitled to, and hereby claim, the allegiance of every Irishman and Irishwoman.

The proclamation was signed by ‘financial speculators unknown to you’ and O’Kelly’s face mask symbolised the shadowy, opaque nature of the creditors to whose upkeep Ireland’s future has been mortgaged.

Can that mask be lifted? It has been in other countries through the mechanism of a debt audit. Initiatives like this have happened in Uruguay and Ecuador, and have taken various forms – including parliamentary committees and citizens’ tribunals. A call for such an audit has been made in relation to Greek debt. The central point in each case is to untangle the web of secrecy around the debt and work out who lent what to whom, when and for what purpose. Typically, there is an expectation that at least some of the debt will be found to be ‘illegitimate’ and can, therefore, be repudiated.

Ecuador, as I’ve previously written about on CrisisJam and elsewhere, provides a particularly striking example. In 2007, Ecuador’s President Correa established a debt audit commission, which reported in 2008 that a portion of the country’s debt was indeed illegitimate and had done ‘incalculable damage’ to Ecuador’s people and environment. Ecuador then defaulted on the illegitimate portion of its debt. Despite predictions of economic disaster, the country registered 3.7% economic growth in 2010 and the forecast is for growth in excess of 5% in 2011. Indeed, there is now strong demand for Ecuadorean bonds again, i.e. the country can access the international financial markets despite a repudiation of its past debt.

The salience of the Ecuadorian example for current public debates in Ireland is obvious – which is why Afri, and some other organisations, are about to launch a debt audit in Ireland. We want this, in the first instance at least, to be quick, so we are going to ask a small number of academics – with expertise in economics, finance, law and related disciplines – to trawl through the books and see if they can answer the following questions:

* To whom is the bank debt (for which the state has assumed responsibility) owed? When was this debt contracted? Specifically, was it before or after the government’s bank guarantee was issued?
* When does the debt fall due for repayment? How much has already been repaid, and to whom?
* How much of the debt is senior, guaranteed and subordinated? And what are the legal implications arising from these different categories?

The researchers will not make recommendations regarding the legitimacy of the debt – they will simply establish the facts insofar as that is possible. It will be up to campaigners to make what use they can of the resource the audit will provide them with. I will be providing crisisjammers and others with more information on this initiative once we are up and running (hopefully very soon).

Realistically, the auditors will probably not be able to get clear and comprehensive answers to the questions they are asking. But that itself will be a telling finding. In the Sherlock Holmes short story ‘Silver Blaze’, the following famous exchange takes place:

Gregory (Scotland Yard detective): Is there any other point to which you would wish to draw my attention?

Holmes: To the curious incident of the dog in the night-time.

Gregory: The dog did nothing in the night-time.

Holmes: That was the curious incident.

The absence of information should be as much of a cause for anger and mobilisation as its existence: ‘You’re asking us to pay this debt, and we don’t even know who we’re paying it to?!’ Though we do have our suspicions: as a recent article on the subject was entitled, ‘It’s the (German) banks, stupid!’ That article cited an estimate that a 50% writedown on the debt of the EU peripheral states would wipe out €850 billion of capital in German and French banks alone. And to stop that happening, money is being channeled from European taxpayers and from the ECB through Ireland, Portugal and Greece to the financial institutions of Germany, France and elsewhere. This is the logic of the so-called ‘bail outs’.

A political problem here is that most Germans (and others) don’t seem to have yet grasped that they are not bailing out feckless Mediterraneans and Celts – they are bailing out their own banks. There is an important and urgent task of political education to be done here, across and beyond Europe. And that will be a theme of a gathering of activists taking place in Athens on 6-8 May: participants from Greece, Poland, Germany, the UK, Morocco, Tunisia, Mexico, Argentina, Malawi, Brazil, Belgium, the Philippines, Ireland, Spain and many others will trade experiences and ideas for action. If we are going to get out of this mess we will need, as the original 1916 proclamation said, the support of ‘gallant allies in Europe’ – and further afield.

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