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
10 - The public authorities take on private creditors’ losses by
socializing them
Beginning
in May 2010, foreign public lenders took the place of foreign private
lenders; the Memorandum of Understanding provided the Greek public
authorities with the means of repaying private lenders, bailing out
the Greek banks to keep them from causing a new episode in the
international banking crisis that had been underway since 2007.
It’s
difficult to imagine a payment default by Greece’s private banks
causing a major international crisis. Nevertheless, the French and
German banks were already so deeply mired in the crisis elsewhere
that an incident in Greece could have worsened the situation. Who
knows? But what we do know for certain is that the French and
German banks pressured their governments to set up the Troika and a
programme aimed at protecting their interests (which are no more
the interests of the populations of France and Germany than they are
of Greece’s, even though it was the Greek people who directly
suffered the consequences).
The MoU
imposed on Greece in May 2010 called for granting €110 billion in
new loans.
At the
same time, finally, despite the doubts that arose in
September-October 2009, the ECB maintained its line of credit to
private Greek banks. This was a central part of the mechanism put in
place by the Troika and a powerful lever for blackmailing the Greek
authorities into submissiveness. Bonds issued by Greek banks to the
ECB are guaranteed by the Greek State. This means that if the Greek
banks are unable to come up with the funds to repay the ECB, the
Greek State has to pay. How? Why, by borrowing from the Troika.
Because the foreign private banks were unwilling to lend money to
Greece at reasonable rates.
And
indeed, starting in May 2010, the Greek State ceased issuing
government bonds to raise funds on the international financial
markets. It took out short-term loans from Greek banks (which was
very advantageous for the banks, since beginning with 2010 the
interest rate was very high and there was no risk). In addition, the
Greek State borrowed abroad from public lenders or the entities
representing them. It borrowed €53 billion from 14 countries in the
Eurozone at 5% or above – a very high rate. These 14 countries
borrowed that amount from private banks, who in turn borrowed from
the ECB at a very low rate. This enabled both the banks and the
states who were Greece’s creditors to reap profits.
After
borrowing from the 14 lender states, Greece also obtained financing
from the EFSF (European Financial Stability Facility), which took
over from them. The EFSF is a private entity based in Luxembourg
City, created in 2010 by the member states of the Eurozone to raise
funds that were then lent to Greece and to other states such as
Ireland, which beginning in November 2010 was also caught in the
machinery of the Memoranda. As may be evident to some, the EFSF
borrowed from private banks at a higher rate than what those banks
themselves paid when borrowing from the ECB…
Greece
also borrowed from the IMF, which is financed by its member States.
The IMF made €5 billion in net profits on loans to Greece between
May 2010 and May 2018 (€5 billion or approximately 4 billion
Special Drawing Rights, the IMF’s unit of account). See
International Monetary Fund, “Greece: Transactions with the Fund
from May 1984 to May 2018”.
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