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The Troika’s Policy in Greece: Rob the Greek people and give the money to private banks, the ECB, the IMF and the dominant States of the Eurozone

On 20 August 2018, the Greek government of Alexis Tsipras, the IMF and the European leaders celebrated the end of the Third Memorandum.

On this occasion, the major media and those in power spread the following message: Greece has regained its freedom, its economy is improving, unemployment is on the decline, Europe has lent Greece 300 billion and the Greeks will have to start repaying that debt in 2022 or in 2032.

The main claims are completely unfounded as Greece remains under the control of its creditors. In compliance with the accords that the Alexis Tsipras government signed, the country must imperatively achieve a primary budgetary surplus of 3.5% which will force it to continue brutal policies of reduction of public spending in the social sector and in investment. Contrary to the dominant message that Greece will not begin to repay its debt until some time in the future, it should be clearly understood that Greece has been repaying considerable amounts constantly all along to the ECB, the IMF and to private creditors, and this prevents it from responding to the needs of its population.

by Eric Toussaint

Part 14 - The IMF’s intolerable interference in Greece from 2010

In January 2017, the CADTM drew attention to two documents kept secret by the IMF, a passage from which about the situation of Greek banks is quoted above. These authentic documents were placed at the disposal of the Truth Committee on Greek Public Debt by Zoe Konstantopoulou, the President of the Hellenic Parliament in office from 6 February to 3 October 2015.

The contents of these documents dated March and May 2010 respectively is damning for the IMF. They clearly show that a large number of its Executive Board members expressed severe criticism of the programme the institution was preparing to implement. Some of them denounced the fact that the programme was aimed at rescuing the private European banks – mainly certain major French and German banks – who were holders of Greek debt, both public and private. Several of them denounced the selfsame policies that had led to the Asian crisis of 1996-1997 and the Argentine crisis in 2001.

Several executives denounced the fact that the principal executive officers (mainly the Managing Director, Dominique Strauss-Kahn and the Deputy Director, John Lipsky) had, unbeknownst to the other members of the Board, modified one of the fundamental rules that condition credits allocated by the IMF to its members.

Indeed, for a loan to be granted by the IMF, it must be shown that this loan and the accompanying programme will render debt repayment sustainable. This condition could not be satisfied in the case of Greece, since the IMF directorate and the European authorities refused to reduce the Greek debt or to make private banks contribute. Therefore the above-mentioned condition was deleted on the sly, and replaced by a new criterion: the need to avoid a high risk of international systemic financial destabilization.

The IMF’s Management invoked urgency to justify this totally irregular change of the rules. To persuade the IMF executives who were the most reticent, the French, German and Dutch directors lied, each promising that their country’s banks would not disengage from Greek bonds. They claimed that the French, German and Dutch banks would hold onto their Greek bonds to enable the newly-starting programme to succeed.

Since then it has been proven that the French, German and Dutch banks massively sold off the bonds they held on the secondary market, thus aggravating the Greek crisis and transferring to European tax-payers, especially Greek tax-payers, the burden of the risks they had taken and of the crisis which was largely their fault.

Again, to calm the reticence of certain executive directors, the IMF directors handling relations with Greece declared that social measures would be taken to protect people with low salaries and small pensions from the austerity measures. They lied.

Furthermore, to get the agreement of the executive members of the IMF, they claimed that Greek banks were sound and that their problems were entirely due to risks engendered by far too much public debt and a colossal public deficit. This was untrue: Greek banks were in a disastrous situation. Another lie invented to convince the doubters was that the plan would be submitted to the Hellenic Parliament for approval.

To the executive directors of the IMF who wanted the banks to contribute “collectively” to the solution by agreeing to debt reduction, those handling the Greek dossier claimed that the Greek authorities would not hear of public debt reduction. The Greek representative, Panagiotis Roumeliotis, confirmed this fabrication.

Later, this same representative claimed that it was under pressure from the European Central Bank (ECB) that Greece had declared that it did not want a debt reduction. According to Roumeliotis, Jean-Claude Trichet threatened to withdraw Greek banks’ access to ECB liquidities. Certainly, Jean-Claude Trichet did use this threat during the months of negotiation of the Memorandum. It turns out that he used the same threat against Ireland, too, a few months later during the fine-tuning of the Memorandum concerning that country.

It is also known that Greek bankers, like the French, German and Dutch bankers, were not interested in reducing Greece’s debt as they refused to contribute to their own rescue package. The Greek bankers managed to get two years’ respite which enabled them to disengage and obtain significant compensation.

The IMF contended that as Greece belonged to the Eurozone, devaluing its currency to regain competitiveness was impossible, so it would have to devalue wages and social benefits. This is what is known as internal devaluation, and it is wreaking havoc in Greece and other peripheral countries within the Eurozone.

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