Does Greece have "odious" debt?
Alexis Tsipras wants Greece to stop paying odious debt. But does it have any?
"My five point plan": a phrase borrowed from Ed Miliband* may have helped boost the chances of Alexis Tsipras, leader of radical left-wing Greek party SYRIZA, which stormed into second place in the Greek parliament.
Admittedly, the Tsipras plan is rather more radical than Miliband's. It calls for:
- Cancelling the technocratic former government's bailout terms, particularly its cuts to pensions and salaries.
- Overturning their abolition of collective bargaining and other laws that attack workers' rights.
- Changes to improve democracy and social justice, from removing MPs immunity to prosecution to overhauling Greece's proportional electoral law.
- A public review of Greek banks.
- A hold on all debt servicing, and an international committee examining the Greek deficit, particularly looking at whether any of the debt can be termed "odious".
The last point is the most interesting one. Odious debt is a legalistic term: It refers to debt run up by a former dictator, which a legitimate successor government can realistically argue ought not to be paid off. As a paper in the Duke Law Journal (via alphaville) puts it:
By enshrining a doctrine of odious debts as a recognized exception to the rule of state succession, some modern commentators have argued, a successor government would be able legally to repudiate the loans incurred by a malodorous prior regime. This, they contend, would have two benefits: it would avoid the morally repugnant consequence of forcing an innocent population to repay debts incurred in their name but not for their benefit, and it would simultaneously force prospective lenders to an odious regime to rethink the wisdom of advancing funds on so fragile a legal foundation.
The authors of the paper point out the problem with such a concept, though:
If this new version of the odious debt doctrine is to be workable, someone must assume the task of painting a scarlet letter "O" on a great many regimes around the world. Who will make this assessment of odiousness and on what criteria? The stakes are high. An unworkable or vague doctrine could significantly reduce cross-border capital flows to sovereign borrowers generally.
Their fears are proved right by Tsipras' argument. For all that the imposition by the EU of a technocratic PM on the Greek people was questionable democratically, the resulting government was hardly on par with the last one which brought odious debt into the public arena: Saddam Hussein's.
Even if Tsipras is making the weaker claim that debt left over from Greece's junta, which collapsed in 1974, ought to be cancelled (if there is even any outstanding), he would be on questionable grounds legally. The whole argument seems far more likely to be a way to announce a selective default without actually announcing a selective default. That or a cynical ploy to get elected.
We'll see the final outcome next Thursday, when the next round of legislative elections are rumoured to be pencilled in for.