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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 16 - Remember that the IMF board dismissed the objections of the Argentine and Brazilian EDs, who had harshly criticized the IMF’s position towards Greece

During the meeting on 9 May 2010, Pablo Pereira, the Argentine representative, openly criticized the past and present orientations of the IMF:

Argentina has been through a very long and sad history of Stand-By Agreements which were aimed at bailing out a debtor country but ended up rescuing private sector creditors, leaving behind massive capital flight and untenable social and economic consequences.

In Argentina, we know too well what the real consequences are of making believe that solvency crises are liquidity crises. Our own experience proves that bail-out packages or debt restructurings that disregard ‘debt sustainability’ and economic growth as a main feature of its design, leaving it to ‘future market access,’ are destined to be short lived.

We are also too familiar with the consequences of ‘structural reforms’ or policy adjustments that end up thoroughly curtailing aggregate demand and, thus, prospects of economic recovery. The so-called ‘structural reforms’ promoted by the Fund hurt deeply countries’ institutional quality and capacity. We have reviewed the projections of the staff, the recommendations and policy conditionalities. We do not share the views, for instance, that the widespread cuts in public expenditures, that a sharp decline in GDP, or that a major reduction in replacement rates of the pension system (from average 75 to 60 percent) will solve the Greek solvency problem. If anything, such measures risk to compound the problem.

The Argentine representative continues: “Harsh lessons from our own past crises are hard to forget. In 2001, somewhat similar policies were proposed by the Fund in Argentina. Its catastrophic consequences are well known (…). Beyond economic theories, there is an undisputable reality that cannot be contested: a debt that cannot be paid will not be paid without a strong process of sustainable growth (…); it is very likely that Greece might end up worst-off after implementing this program. The adjustment measures recommended by the Fund will reduce the welfare of its population and Greece’s true repayment capacity.

There follows an excerpt from the declaration of the Brazilian Executive Director concerning the absence of a restructuring process in the programme: “As it stands, the program risks substituting private for official financing. In other and starker words, it may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bail-out of Greece’s private debt holders, mainly European financial institutions.

As for the Argentine Executive Director, he declared: “Since this is still a global systemic crisis, the strategy of squeezing public financing and isolating the country blaming it for past fiscal indiscipline or lack of competitiveness will most likely fail. [...] A sound and equitable burden sharing of their costs would have been good for the reputational costs of the Fund (that it could be blamed for simply buying some time or ensuring that foreign banks will be paid in full over the next year before the inevitable happens) and it would have been even better for the Greek population and its growth prospects.

As a consequence of the creditors’ refusal to agree to marking down their Greek bonds, sovereign Greek debt rose from €299 to 355 billion between the end of 2009 and the end of 2011, an increase of 18.78%. Throughout 2010-2013, an unprecedented recession was triggered by the policies dictated by the IMF and the other members of the Troika. Not one of the IMF forecasts about the improvement of Greece’s finances has ever proved correct. The results of the 2010 Memorandum completely discredit the optimistic predictions of the IMF in particular and of the Troika in general.

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