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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 9 - The real crisis of the Greek public debt started in 2010

From March-April 2010, foreign private lenders (notably French and German banks) started to demand higher and higher risk bonuses from the Greek government. That is, foreign private lenders stopped their credit lines to the Greek government. But only after May 2010 did foreign private banks attempt to sell their Greek securities and the ECB to purchase them. It was a windfall for banks in the Eurozone, as will be clear later.

In May 2010, the ECB implemented what it called a Securities Markets Program (SMP)*. Through this programme, which lasted from May 2010 to September 2012, it purchased over €210 billion in securities issued by Italy, Spain, Ireland, Portugal and Greece on the secondary market. It purchased €56.5 billion in Greek securities from private banks in the Eurozone between May 2010 and February 2012. Over the first eight weeks of the SMP alone, the ECB purchased about €42 billion, i.e. three fourths of the Greek securities it purchased until 2012.

* In May 2010 the ECB established the Securities Markets Programme (SMP). Under the terms of this Decision, from May 2010 to September 2012, the ECB bought over €210 billion of public bonds issued by Italy, Spain, Ireland, Portugal and Greece on the secondary market. The outstanding amount was €138.1 billion on 29 May 2015, with €27 billion owed by Greece. The ECB bought €56.5 billion of Greek securities.

The ECB Decision of 14 May 2010 creating the SMP states: “The Governing Council will decide on the scope of the interventions. The Governing Council has taken note of the statement of the euro area Member State governments that they ‘will take all measures needed to meet their fiscal targets this year and the years ahead in line with excessive deficit procedures’ and the precise additional commitments taken by some euro area Member State governments to accelerate fiscal consolidation and ensure the sustainability of their public finances. (…) As part of the Eurosystem’s single monetary policy, the outright purchase of eligible marketable debt instruments by Eurosystem central banks under the programme should be implemented in accordance with the terms of this Decision.

On 31st May 2010, Jean-Claude Trichet, President of the ECB, stated the ECB’s response to the recent tensions in financial markets: “It is crucial that governments implement rigorously the measures needed to ensure fiscal sustainability. It is in the context of these commitments only that we have embarked on an intervention programme in the securities markets. (…) The Securities Market Programme is an extraordinary action, which was undertaken in the situation of severe tensions in financial markets. I would like to stress that the rigorous application of the adjustment programmes by governments is essential to guarantee the progressive return to a more normal functioning of financial markets.

The ECB spent €40 billion to acquire the estimated face value of €55 billion, which if held to maturity, the ECB would reap the full difference between the price paid and the repayment plus interest. The ECB has already received hefty interest from Greece, as the rates on the Greek bonds it holds are high.

Although the ECB holds far less Greek debt than it does from Italy or Spain, Greece pays much more interest to the ECB. Over the course of 2014, the Greek Government paid €298 million in interest on ECB loans, which represents 40% of the €728 million in income that the ECB received from the total interest paid by the five countries in the SMP program. This is despite the fact that the Greek debt with the ECB represents only 12% of the total.

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