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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 17 - Looking back at how Greek banks responded to the public debt

We should emphasize that between December 2008 and December 2009, Greek banks had increased their purchase of Greek public securities by 33%. In December 2008, Greek banks held €30 billion in Greek securities while one year later the amount reached €40 billion. This shows that Greek banks derived profits from holding Greek securities at a time when the IMF and the ECB’s director claimed that the Greek treasury was heading for disaster.

Later, between December 2009 and December 2010, Greek banks somewhat reduced the number of Greek securities they held. It fell from €40 to 36 billion on 31 December 2010. Yet if we add their purchase of short-term public securities (treasury bills under one year), the total amount stays at €42 billion. This clearly shows that they were not anticipating the Greek State to default and that they derived several advantages from holding those securities while international media ran big headlines on the sovereign debt crisis in Greece!

Only in 2011 did Greek banks significantly reduce the number of Greek securities over one year; it fell from €36 billion on 31 December 2010 to €24 billion in December 2011. On the other hand Greek banks increased their purchases of short-term Greek securities by 40%, from €5.8 billion to €8.3 billion.

How can this be explained?

Easily enough: Greek banks know that a restructuring of the Greek debt is being negotiated and that the value of securities will be cut, so they cautiously resell some of them. But they are also told that they will receive compensations and thus feel reassured. Besides, holding short-term securities (3, 6 or 9 months) further reduces the risk banks run since they can decide not to keep them if they consider that a risk becomes likely. There is another explanation for their buying securities under one year: these will not be affected by value cuts, but will be paid at 100% at maturity and yield high interests.

Moreover if Greek banks keep a lot of Greek debt securities in their assets, it is also because these increase their equity/total assets ratio, as explained above. Lastly, since the ECB maintained its credit line to Greek banks, they can exchange their Greek securities against the liquidities they need.

Greek banks had been helped in 2008-2009, and they were bailed out again with public money. Indeed, part of the loans granted in the context of the first MoA was injected into Greek banks. The four largest Greek banks thus increased their hold on the Greek banking market as they absorbed smaller ones. Not only did those large banks claim they had suffered losses and thus eschewed taxation but they carried on with their mafia practices (see illustrations developed by Daniel Munevar about the Proton and Piraeus banks in “Greece: The PSI and the process of bank recapitalization (2012-2016)”, http://www.cadtm.org/Greece-The-PSI-and-the-process-of). Not one single bank executive was imprisoned. Greek banks moved as much capital abroad as they could when their country’s economy badly needed them. The proportion of non-performing loans increased. Banks cut off loans to households and SMEs.

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