Madrid Manifesto against Illegitimate Debt and Vulture Funds

At the end of the three days of conferences and debates, a manifesto was adopted. It is as under:

Over the past decades, the global economy has been characterised by the supremacy of financial capital, both politically and economically. This would not have been possible without the great transformations of the 1980s, which laid the foundations for accumulation in the interest of capital, thanks to the globalisation of the economies through the opening up to the outside world, in particular the liberalisation of the international financial markets, and also thanks to the liberalisation and privatisation of the basic production sectors, as well as the constant decline in the share of wage earnings in the national income.

History is marked by a recurrence of crises that indicate a series of weaknesses intrinsic to the functioning of the capitalist system. The nature of financial crises has as a common substratum that financial systems enter into a credit expansion beyond rational parameters and that the resources offered by financial institutions, both public and private, produce spirals of indebtedness among economic agents.

Fifteen years ago, one of the worst debt crises originated in the US banking system and spread to all financial systems. In Europe, it exploded in the form of a banking crisis, as banks held 80% of the mortgages.

The European authorities and the Spanish state reacted with a package of measures to save the banks. As a result, millions of people lost their jobs, their housing, and their social protection, and women were particularly affected.

The recipe of the European Central Bank, the European Commission, and the IMF was the imposition of austerity policies with cuts in social rights. The priority was to save the system and restore confidence in the financial sector.

Now, fifteen years later, we wonder whether we are in the same or worse situation.

The public debt situation in European countries has worsened considerably compared to pre-pandemic levels. Three years after the Covid-19 health emergency and after almost two years of public investment and aid aimed at reviving the economy and containing the energy crisis, member states are arriving with high levels of debt—in the case of the Spanish state with a central public debt of 116% of GDP and peripheral governments such as the Valencian Country with more than 50% of its GDP—with large companies with historic profits, and with a good part of the European citizenry in difficulty.

The main cause of this rise is the decision by governments not to tax the big corporations that have taken advantage of the health and energy crises and the war to illegitimately increase their profits. Instead of funding public spending by raising taxes on the richest, especially those who got richer during the crisis at the expense of people’s misfortune, governments have once again resorted to illegitimate debt.

Currently, in the Spanish State, annual debt service payments considerably limit investments to cover the basic social needs essential for citizens, such as health, housing, social services, education, etc. The debt is proving unsustainable.

Faced with this alarming state of public debt, the European Commission (EC) presented a proposal in November 2022 to reform the European economic governance framework in order to discuss and negotiate with the Member States a return to the Stability and Growth Pact (SGP). This is the sacrosanct maxim of not exceeding a “3% deficit” and “60% public debt” in the name of the stability of the European economy and the euro.

The Commission says that it is time to take stock of the situation and consider how to return to the SGP. This is worrying because it raises the question of who will pay for all this debt and whether a new wave of cuts and austerity policies is expected.

Meanwhile, the global financial casino runs its course and continues to pose a major risk to society; the lobbies erode democracy, and the global debt increases; systematic tax evasion is now endemic and structural; big private capital has taken control of the so-called ecological transition; and big investment funds colonise essential public services and the productive economy.

With the ECB’s decision to raise interest rates sharply, following the example of the US Federal Reserve, the new public and private debt crisis that was maturing has taken on acute forms, mainly affecting the countries of the South. Gradually, this rise in interest rates will make the repayment of public and private debt increasingly unbearable. Movements against illegitimate debts, which had receded in recent years during the period of easy money, will have to be revived.

We believe that this meeting in Madrid gives us the opportunity to open a new space for public debate on the root causes of the crisis and what we want to do with the financial sector. We must defend our future and impose a socially just solution to the current debt. We are determined to intensify the fight for democratic control of finance and the socialisation of the banks. The economy must serve politics, and politics must serve human needs.

We condemn the negative impact of a short-term vision of financial markets that govern the ways in which societies develop, fuel social inequalities, poverty, centralist, authoritarian, and austerity state policies, the collapse of public services, and climate change, and therefore, with reference to the debt, we demand:

1. An end to the austerity policies imposed in the name of debt repayment by the international financial institutions and the States, as well as an end to the extractivist and colonial policies imposed by the structural adjustment plans.

In the Spanish state, the end of the false political and economic decentralisation of the autonomous model of the ’common regime’, which subordinates the development of nations and regions and their citizenship to the preservation of a political, economic, and media elite that bases its power on the reinforcement of the domination of state capital.

2. Organising citizen debt audits that identify illegitimate and unsustainable debts with the aim of cancelling them, promotes an effective and fair debt relief process and provides a way out of the debt trap in which many citizens, companies and countries are caught. This debt relief process is part of the development of new economic frameworks that move away from productivism and strengthen social justice.

3. Prioritising the general interest before debt repayment. In this sense, we propose the abrogation of Article 135 of the Constitution, which places the repayment of the debt before any social expenditure.

4. Creating a public banking and insurance service so that it is managed under citizen control in the general interest. Similarly, for cases where depositors’ interests are to be safeguarded due to the failure of retail banks, create a special crisis fund in all countries, fed by an emergency tax on financial companies.

5. To put an end to tax evaders’ impunity by generalising the automatic exchange of banking and tax data as well as the permanent abolition of banking secrecy so that states can know and seize the funds hidden in tax havens. In Spain, put an end to the tax domicile of companies in territories where their economic activity is not carried out.

6. To seek to recover state sovereignty from the power of the market with a highly progressive income tax system.

7. Putting the European Central Bank (ECB) at the service of the general interest (and no longer at the service of the markets), which requires, as a priority, placing the ECB, which is responsible for monetary policy and banking supervision, under democratic control by repealing the ban on states and governments borrowing from their central banks. Cancel the eurozone debts held by the ECB, which represent on average 25–30% of the sovereign debt of each eurozone country.

Regarding hedge funds and vulture funds, it is necessary to :

1. Inform and explain to the public the serious and enormous damage that vulture funds can cause to our lives.

2. In the sphere of basic services, whether public or private, such as housing, education, health, social services, care for the elderly or the environment, we call for the implementation of measures to prohibit the entry of speculative funds into these sectors and to promote a form of management that is geared towards meeting the needs of citizens.

3. To promote a law against vulture funds in the Spanish State, similar to the Belgian law which prevents these funds from doing harm, as they enrich themselves by destroying the fundamental rights of the population.

Until such time as this law is passed, we propose to prevent these funds from receiving public money if they do not comply with a minimum level of transparency that includes revealing the identity of their shareholders, who enrich themselves in opacity by destroying the fundamental rights of the population.

4. Promote the development of similar regulations of international scope, starting with the European Union, as vulture funds often use the courts of “friendly” countries to circumvent state laws.

5. The disappearance of tax havens.

So let us dream a bit… The above will mean that the warnings and demands of the social and citizen movement have finally been heard by the international, European and state authorities, which has finally resulted in the implementation of radical reforms to regulate the economic-financial system. Their decisions must be inspired by the general interest, the voice of the citizens. In addition, environmental issues and the fight against inequalities must become a priority.