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 2 - International banking panic in 2008, private Greek banks in great difficulty and the first bank bailout at the expense of the Greek people
From September 2008, in the wake of the most recent phase of the international banking crisis caused by the bankruptcy of the Lehmann Brothers bank in the United States, private international banks almost ceased lending one another money. The Greek banks which had been borrowing massively from about fifteen banks of the Centre found themselves on the edge of bankruptcy as they had no means of repaying the foreign banks. Indeed, banks borrow to be able to repay (they are not the only ones who do that: States also do it to repay public debt).
From October 2008, in a climate of banking panic in the United States and Europe, the Greek banks who wanted to borrow had to agree to pay very high risk premiums – rates for Greek banks climbed 500 basis points in 2008 – to private foreign finance companies. (Amongst these were not only banks, but also Money Market Funds and investment funds.) Greek banks’ stock prices also collapsed. By the end of 2008 Greek banks’ stocks had lost 80% compared to their value at the beginning of 2007. At the end of 2008, the Greek government came to the rescue of the Greek banks by making €20 billion available in the form of capital injection or issuance of guarantees.
It is, then, perfectly clear that the Greek crisis was actually a crisis of private debt, especially of private banks, and not a crisis of public debt at all.
The ECB opened up an exceptional line of credit to the private banks of the Eurozone having difficulty, largely attenuating the disengagement of bankers of the main Eurozone countries and the United Kingdom from the Greek banks, whose survival then became dependent on this line of credit.
In October 2009, the ECB let it be understood that it might well put an end to this exceptional line of credit. This created panic among Greek bankers and worried their foreign private creditors.
As of October 2009, the banks of France, Germany, Benelux, the United Kingdom, Italy and Austria which were still lending to the private sector in Greece (banks, households and non-financial companies) further reduced access to credit.
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