By Tim Jones
It is not the people of Greece who have benefitted from bailout loans from the IMF, EU and European Central Bank, but the European and Greek banks which recklessly lent money to the Greek State in the first place.
When the IMF, European and ECB bailouts began in 2010, €310 billion had been lent to the Greek government by reckless banks and the wider European financial sector. Since then, the ‘Troika’ of the IMF, EU and European Central Bank have lent €252 billion to the Greek government.[1] Of this, €34.5 billion of the bailout money was used to pay for various ‘sweeteners’ to get the private sector to accept the 2012 debt restructuring. €48.2 billion was used to bailout Greek banks following the restructuring, which did not discriminate between Greek and foreign private lenders. €149.2 billion has been spent on paying the original debts and interest from reckless lenders. This means less than 10% of the money has reached the people of Greece.
Today the Greek government debt is still €317 billion. However, now €247.8 billion – 78% of the debt – is owed to the ‘Troika’ of the IMF, European Union and European Central Bank, ie, public institutions primarily in the EU but also across the world. The bailouts have been for the European financial sector, whilst passing the debt from being owed to the private sector, to the public sector.
read more here: http://jubileedebt.org.uk/reports
Jubilee Debt Campaign:
The people of Greece have demanded a new approach to the country’s enormous and unpayable debt. As the new Greek government starts talks aimed at debt cancellation, international support is crucial.
Tell George Osborne, the Chancellor of the Exchequer, to support Greece’s call for a renegotiation of its debt.
Related posts :
Do you still believe that the Greek government wants to save Greece? (2)
Greek Bail-Out: 77% went into the Financial Sector confirmation: Sauvetage de la Grèce : la Commission européenne confirme les chiffres d’Attac
The decoding of the Greek debt crisis
Greg Palest on CNBC: Greece is a Crime Scene
Greek financial crisis: The full story
Seven Myths about the Greek Debt Crisis
The true magnitude of Greece’s deficit in 2009 was 3.9% of GDP, one of the lowest in Europe
Greece : Report unveils human rights violations stemming from austerity policy
Troika consultancies: A multi-million euro business beyond scrutiny
German civil and human rights activist appealed the International Criminal Court for Greece
JusticeForGreece 
Reblogged this on tolmima.
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Banks bailed out — themselves
By Jerry Goldberg February 3, 2015
Detroit, Feb. 1 — When the Troika — the International Monetary Fund, European Commission and European Central Bank — disbursed 226.7 billion euros to Greece between May 2010 and the present, European capitalists and politicians spoke of these funds as if they were a gift to the Greek people. In reality, the funds went almost exclusively to bailing out the banks, provided little benefit to the people and increased Greece’s public debt.
Only 27 billion euros, 11 percent of the total, went to Greece’s governmental operating needs. By contrast, 122 billion euros, or more than half the funds, went to debt servicing. Some 81 billion euros were paid in maturing debt obligations and 40 billion euros in interest. Some 94 billion euros went to replace nonperforming bank loans through new bond exchanges, buybacks and other forms of restructuring — in other words, to make up the losses on worthless bonds issued by the banks. An additional 9.1 billion euros was paid back to the IMF, and 2.3 billion euros were paid in capital to the European Stability Mechanism. (“Where did all the money go?” by Yiannis Mouzakis, tinyurl.com/oxku48g.)
Especially significant is that the banks and financial institutions which held the Greek debt before 2010 were essentially paid off and bailed out. As a result, 65 percent of Greek debt was shifted to the public sector, making other eurozone governments now liable for it. Another 20 percent is in the hands of the ECB and IMF. (“The troika saved banks and creditors — not Greece,” tinyurl.com/kbxvzt9.)
This is very similar to the U.S. bank bailout that began in 2008, in which the U.S. Treasury and Federal Reserve bought up several trillion dollars in bad bank debt, particularly mortgage securities, and backed them up with U.S. taxpayer funds through Fannie Mae and Freddie Mac.
Wall Street’s role in Greek ‘debt’
As a result of the Troika’s “bailout,” Greek government debt has grown from 133 percent of the country’s gross domestic product in 2010 to 174 percent today. (“Six key points about Greek debt and the forthcoming election” by Tim Jones, Senior Policy and Campaigns Officer, Jubilee Debt Campaign, January 2015.)
However, the study by Mouzakis, cited above, notes that beginning in 2013 and continuing until today, Greek government revenues have exceeded expenses, with no financing needed to cover state operations. If Greece did not pay off its debt to the Troika — and through the Troika to the banks and financial institutions — it would be able to maintain its operations and likely increase services to the people, which have been devastated to provide the funds to pay off the banks. Canceling the debt to the banks, instead of hobbling Greece, would likely raise the people’s standard of living.
Wall Street played its own role in creating the Greek financial crisis, while profiting from it. In 2001, the investment banking firm Goldman Sachs engineered a deal with Greece that allowed the country to mask its real deficit in order to adopt the euro as its currency. Goldman Sachs engineered a “derivative” — a cross-currency and interest rate swap — in which it advanced 2.8 billion euros to Greece to eliminate 600 million in euros owed by Greece at the time.
By 2005, when Goldman Sachs sold the swap to the National Bank of Greece, the amount owed by Greece had mushroomed to 5.1 billion euros. In addition, Goldman Sachs pocketed a $300 million fee for engineering this deal. (New York Times, Feb. 14, 2010)
Goldman Sachs underwrote similar swaps for the city of Detroit, which cost the city $365 million in termination fees on swaps tied to pension obligation certificates, and $537 million on swaps tied to water infrastructure bonds.
http://www.workers.org/articles/2015/02/03/banks-bailed-out-themselves/
Iceland President Olafur Ragnar Grimsson ‘Let banks go bankrupt’
by AussieNews1
January 25, 2013
from YouTube Website
Iceland President Olafur Ragnar Grimsson tells Al Jazeera’s Stephen Cole that Europe should let banks that are ran “irresponsibly” go bankrupt.
Speaking at the annual World Economic Forum in Davos, Grimsson also held his country as a model of economic recovery after its near-collapse four years ago.
“We didn’t follow the traditional prevailing orthodoxies. And the end result four years later is that Iceland is enjoying progress and recovery.”
“Why do we consider banks to be like holy churches?”,
… is the rhetorical question that Iceland’s President asks (and answers) in this truly epic three minutes of truthiness from the farce that is the World Economic Forum in Davos.
Amid a week of back-slapping and self-congratulatory party-outdoing, as John Aziz notes, the Icelandic President explains why his nation is growing strongly, why unemployment is negligible, and how they moved from the world’s poster-child for banking crisis 5 years ago to a thriving nation once again.
Simply put, he says,
“we didn’t follow the prevailing orthodoxies of the last 30 years in the Western world.”
There are lessons here for everyone – as Grimson explains the process of creative destruction that remains much needed in Western economies – though we suspect his holographic pass for next year’s Swiss fun will be reneged…
http://www.bibliotecapleyades.net/sociopolitica/sociopol_bigcrash171.htm
Parliamentary questions
23 April 2015
E-006557-15
Question for written answer
to the Commission
Rule 130
Dimitrios Papadimoulis (GUE/NGL)
Subject: Profits by the IMF, EFSF and ECB from interest on Greek loans
The Jubilee Debt Campaign, the international organisation for global debt, has recently revealed that, since 2010, the IMF has received some EUR 2.5 billion from Greece in interest. More specifically, according to the Jubilee Debt Campaign, the IMF charges an average interest rate of approximately 3.6% on ‘rescue loans’, with real costs valued at just 0.9%. Such an interest rate policy in the case of Greece will have generated a profit of about EUR 4 billion for the IMF by the time it is repaid in full in 2024.
Given that European public opinion is misinformed about the actual amount of loans taken by Greece, their use and the rates charged, will the Commission say:
— What are the interest rates imposed on Greece’s loans by the IMF (Stand-By-Agreement and Extended Fund Facility) and by the European institutions (Greek Loan Facility and EFSF)?
— How much has Greece paid so far in interest to the IMF, European lenders and the ECB and the national central banks through the Greek bonds that were not subjected to a haircut by the PSI?
Original language of question: EL
Last updated: 11 May 2015
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+WQ+E-2015-006557+0+DOC+XML+V0//EN
Karen Hudes: “A Coup Has Taken Place In Athens, The Greeks Have Been Scammed!”
Who is Karen Hudes?
Karen Hudes studied law at Yale Law School and economics at the University of Amsterdam. She worked in the US Export Import Bank of the US from 1980-1985 and in the Legal Department of the World Bank from 1986-2007. She established the Non Governmental Organization Committee of the International Law Section of the American Bar Association and the Committee on Multilateralism and the Accountability of International Organizations of the American Branch of the International Law Association.
http://kahudes.net/about-us/
Greece and the IMF: Who Exactly is Being Saved?
Ronald Janssen July 2010
Center for Economic and Policy Research
1611 Connecticut Avenue, NW, Suite 400 Washington, D.C. 20009
202-293-5380
http://www.cepr.net
Contents
Introduction……………………………………………………………………………………………………………………………………..1
The Background: Serious Homemade Policy Errors ………………………………………………………………………..1
The Joint IMF/Commission Policy Package…………………………………………………………………………………….2
Cuts without Growth: A Policy Doomed to Fail………………………………………………………………………………3
What the Greek Rescue is Really About: Exchanging Debt Ownership to Save European Banks and Creditors…………………………………………………………………………………………………………………………………………..6
Conclusion: The Broader Picture in the Euro Area ………………………………………………………………………….7 References………………………………………………………………………………………………………………………………………..8
Introduction
On May 9, 2010, a joint mission of the IMF and the European Commission concluded negotiations on a loan package to be provided to the Greek government. The amount of these loans as well as the volume of the adjustment effort that is to be delivered by Greece is staggering. In return for an (additional) 30 billion euro austerity program, Greece will receive 80 billion euros of European bilateral loans and 30 billion euros of IMF loans over the next three years.
The view widely held in policy circles is that this loan package, even though it implies very tough cuts, will ultimately save Greece and its economy from financial market speculation.
This paper takes a closer look at the Greek adjustment program and arrives at the opposite conclusion. Three years from now, Greece will be facing an even higher debt burden. Meanwhile, jobs and economic growth will have been sacrificed. The only thing the rescue package really achieves is a major change in the ownership of debt. With Greek sovereign debt being transferred from the balance sheets of banks to the balance sheet of European governments, the real purpose of the entire operation is to save European banks by relieving them from holding debt titles upon which a potential default could be looming.
The Background: Serious Homemade Policy Errors
Economic policymakers in Greece have made serious policy mistakes in the years preceding the crisis. Fiscal policy was pro-cyclical; revenue declined substantially from 2000-2004, despite annual GDP growth averaging 4.5 percent during these years. Taxes, already below the European average level (around 44% of GDP), were slashed. Public spending rose rapidly after 2007, mainly in response to the economic slowdown and then recession (see Figure 1 below).
Moreover, previous Greek governments were not fully reporting these trends in national statistics. With the help of Goldman Sachs, financial operations involving derivatives were developed so that debt and deficits could be downplayed and Greece could qualify for Euro Area membership. Public finances are also struggling with corruption and tax evasion, both believed to be widespread.
It is against this background that the Greek government, newly arrived in office, decided in favor of reporting correct deficit and debt numbers. In October 2009, the deficit for 2008 was revised upwards from 5% to 12.5% of GDP while the projected deficit for 2010 also went up from 3.7% to 12.5% of GDP and later to 13.6% of GDP.
Financial markets did not appreciate this effort at transparency by the newly elected Greek government. Nor did the public warning of the central bank governor of Greece for banks to be careful in buying Greek sovereign debt and using it as collateral in liquidity operations with the European Central Bank go down well. From November on, Greece was hit by several speculative waves, bidding up the interest rate on sovereign debt to exorbitant levels, at times exceeding 10%.
The Joint IMF/Commission Policy Package
Finally, at the beginning of May, a joint mission from the IMF and from the Economics and Financial directorate of the European Commission (DG Ecfin) was called in to negotiate a loan rescue. In return for access to a 110 billion euro pool of loans over the next three years, Greece had to commit to a package of 30 billion euros of fiscal cuts implemented over the period from 2010- 2014. These cuts are equal to 11.1% of annual GDP, with 5.3% of GDP coming from expenditure cuts and 4% from increased revenue. Structural reforms of the tax system (tackling tax evasion) and the expenditure process (tackling corruption) would yield an additional 1.8% of GDP by the end of the program (see Table 1). Adding the 5% of GDP of structural measures already decided under European peer pressure over the previous months makes for a total consolidation package equal to 16% of annual GDP.
TABLE 1
Overview of the Fiscal Consolidation Package Agreed with the IMF and the European Commission
Revenue (% of GDP) 2010 0.5 2011 3.0 2012 0.8 2013 -0.3
Expenditure (% of GDP) 2.0 1.1 1.7 0.5
‘Structural reforms’ Total (% of GDP) (% of GDP) N/a 2.5 N/a 4.1 N/a 2.4 1.8 2.0
1.8 11.1
GDP (implicit in the program, in billions of current euros) 231 224 228 235 242
2014
T otal 4.0 5.3 Source: IMF.
Looking closer at the adjustment program, one finds that the goal has been to eliminate as quickly as possible the primary deficit (i.e. the difference between taxes collected and non-interest
expenditure). The substantial cuts implemented in 2010 will indeed have the effect of slashing the primary deficit from 8.6% of GDP in 2009, to 2.4% in 2010, and 1% in 2011 (see Table 2). In other words, if Greece is allowed to continue to run deficits in the following years, this deficit spending will be entirely attributable to interest payments on outstanding debt.
TABLE 2
Greece: Medium-Term Fiscal Strategy (% of GDP)
Primary balance Overall deficit Interest
Source: IMF.
2009 2010 2011 2012 -8.6 -2.4 -0.9 1 -13.6 -8.1 -7.6 -6.5 5.0 5.6 6.6 7.5
2013 2014 3.1 5.9 -4.9 -2.6 8.1 8.4
Table 3 provides some more detail on the exact consolidation measures Greece has committed itself to. Besides hiking value added taxes, the adjustment program focuses on reducing the government wage bill. The various measures regarding public sector employment (eliminating Easter, summer and Christmas bonuses, heavily reduced replacement of retiring workers with new hires, cuts in transfers to public enterprises) are to deliver close to 2% of GDP. This is topped off with cuts in social benefits amounting to 1.5% of GDP (elimination of pension bonuses, a nominal pension freeze, means-testing of unemployment benefits). Tax policy is also used to tax highly profitable firms (0.3% of GDP) and to introduce ‘presumptive’ taxation of professionals. Meanwhile, the IMF also claims that its measures are designed to protect the most vulnerable: therefore low-income public sector workers will continue to receive means-tested bonuses and the VAT increase on foodstuff is limited to 1%.
TABLE 3
Effect of Selected Consolidation Measures on the Deficit in 2013 Relative to 2009
% of GDP
Revenue measures
Broadening VAT base 0.7 Gaming royalties 0.3 Presumptive taxation of professionals 0.2
Expenditure measures
Workforce reduction (an additional 20,000) 0.5 Nominal pension freeze 0.2 Cancel second installment solidarity allowance 0.2 Cut transfers to public enterprises 0.7
Source: IMF.
Cuts without Growth: A Policy Doomed to Fail
A fiscal contraction this of size will have a substantial impact on economic activity and jobs. The IMF’s staff report confirms this by projecting a contraction of 4% of GDP in 2010 and a continued shrinking of economic activity by 2.6% in 2011. In 2012 the economy is projected to pick up again, but the recovery would be exceedingly weak, with growth projected at 1.1 percent. After 2012, the IMF projects that the economy will expand in real terms at a rate of 0.94 percent annually.. With this growth scenario, according to IMF projections, by 2015 Greece still does not reach its 2008 level of real GDP.
Moreover, it may very well be the case that the IMF is underestimating the recessionary impact of fiscal consolidation. For example, it seems unlikely that the Greek economy would grow again at a rate of 1.1% in 2012 at the same time as an additional fiscal squeeze equal to 2.4% of GDP is being administered.
However, one does not need to question the growth projections to obtain dismal outcomes on the labor market. Even in the relatively optimistic growth scenario of the IMF, employment would fall by 6 percentage points and hardly recover by 2015. Unemployment is projected to rise from 9.4% in 2009 to 14% in 2013/2014.
Importantly, the initial collapse and following standstill in economic activity and nominal levels of GDP is also extremely bad news for the strategy of fiscal consolidation itself. On the one hand, to keep on servicing interest payments (see above), nominal debt will continue to go up. On the other hand, nominal GDP goes down and tends to stay down. This interaction between a rising numerator (nominal debt) and a stagnating denominator (nominal GDP) will result, according to the IMF itself, in a sovereign debt ratio of 145% of GDP by 2014, compared to a ratio of 115% in 2009.
Moreover, the picture is not really brightening up afterwards. Figure 2 below shows the mechanics of debt over the long run. One line traces the evolution of the debt ratio as calculated by the IMF. The IMF does this by assuming a trend rate of 4.3% nominal growth, an average interest rate on public debt of 5.9% and, importantly, a primary surplus of 6% of GDP to be reached in 2014 and remaining firmly at this level from then on. In this scenario, the debt to GDP ratio would fall but only gradually. In 2020, debt would still be at 120% of GDP, well above the level where it was before the crisis (99% in 2008).
The IMF’s scenario of debt dynamics is highly dependent on reaching a primary surplus of 6% of GDP. As can be seen from Table 2 above, the primary surplus is expected to jump from 3.1% of GDP at the end of the IMF program in 2013 to 5.9% in the following year. However, the IMF does not specify which measures are to be taken in order to obtain this additional increase in the primary surplus. The IMF may be counting on the possibility that structural reforms (improved tax collection) may improve public finances by this amount. It is also possible that the 3 percentage points of additional primary surplus were simply added to improve the longer-term outlook for the dynamics of Greece’s debt. The second line in Figure 2 shows what happens to debt dynamics if the primary surplus does not increase to 6.0 percent of GDP as the IMF assumes, but remains at 3%. The long-term debt dynamics become even more dismal: debt climbs up to over 148% of GDP and remains over 140% even at the horizon of 2020.
This long drawn out process of unwinding sovereign debt raises the crucial question of whether Greece will be able to regain financial market confidence in time, i.e. by 2014. From that year on, Greece will have to return to the markets and find the financial means to pay back the 110 billion euro loan rescue package, representing some 40% of Greece’s GDP. On top of this, Greece will also need to repay those debts that are set to come due in the rest of this decade. With debt having exploded to a level of 145% of GDP, it is likely that financial markets would continue their refusal to roll over Greek debt, thereby reviving the specter of exceptionally high interest rate charges bankrupting the state and the economy.
The fact that financial markets already seem skeptical does not bode well. Immediately after the announcement of the loan rescue package, interest rate spreads on Greek sovereign debt came down from extremely high levels. However, the interest rate on 10-year Greek bonds has since moved up again. By mid-June, it stood at 9.5%, almost four times the interest rate on German bunds. On top of this, and according to newspaper accounts, savers continue to take funds out of the banking system and out of the country, placing deposits mainly in Cyprus and the UK.
This vote of ‘no confidence’ should not come as a big surprise. Even if financial markets often behave in an irrational way, they do understand the basic principle that in order to repay debt, one needs to be able to generate sufficient revenue. They also understand that a policy of slashing deficits can be self-defeating. Negative feedback effects from deficit cuts to economic activity, and from there to lower than expected tax revenue, can force the economy into prolonged stagnation. This stagnation will make it more difficult to repay debt, especially if it is associated with deflation and therefore falling nominal revenue flows. With economic activity as well as prices being pushed downward by aggressive fiscal cuts, the denominator effect of falling GDP pushes an already high debt ratio even higher.
Financial markets may reasonably fear that Greece, through excessive austerity, will trap itself in a prolonged period of stagnation and deflation. As a result of its membership in the Euro Area, there is no escape route in the form of a currency devaluation or looser national monetary policy. No fiscal consolidation program however ambitious or aggressive is able to address these concerns.
What the Greek Rescue is Really About: Exchanging Debt Ownership to Save European Banks and Creditors
The IMF and the European Commission surely have done similarly calculations. They must recognize that it is unlikely that their rescue package will leave Greece’s finances on a sustainable path.
In this way the package is not consistent with a standard IMF structural adjustment program that is supposed to be fiscally credible, thereby restoring the country’s access to financial markets. In this case, the IMF and the Commission likely recognize that their adjustment program, despite its harsh measures, will not restore financial market confidence. This could explain the increase in the size of the package from the 40 billion euros on May 1 to the 110 billion euros in the final package. Given the calendar of debt repayments coming up, it was probably thought necessary to boost the volume of the loan package to Greece to 110 billion so that Greece would be taken out from the global financial marketplace for the next two to three years.
This raises the core issue of the so called rescue package: If market confidence is not being restored while the Greek economy is at the same time being pushed into recession, double digit unemployment and rising poverty, then what is the point? Who or what exactly is being saved?
In the end, the purpose of the rescue package may boil down to a huge shift of debt from (mostly) private banks into public hands. The 110 billion euros now being lent to Greece by the IMF and European governments will be mainly used to pay back the banks and institutional investors who are now holding Greek debt. Banks, insurance companies and pension funds are the real beneficiaries. The possibility of Greece defaulting on the payment of interest and principal that is due should now be excluded for the next three years.
There is a clear European dimension to this, given the fact that the major part (almost 80%) of Greek sovereign debt is not in the hands of the Greek financial system but rather is in the balance sheets of German, French and UK banks (see Table 4). Europe and the IMF are not so much providing Greece with fresh finance but, most of all, shielding the European financial system from up to 200 billion euros of losses that could result from a Greek default. Curiously, almost one quarter of Greek debt is located in the UK (and Irish) financial sector. The obvious beneficiaries of the Euro Area governments’ package are not Greek workers and citizens who will suffer from severe budget cuts and recession, but financial centers such as the City of London.
TABLE 4
Structure of Ownership of Greek Sovereign Debt
By country
UK/Ireland 23% France 11% Germany/Switserland/Austria 9% Italy 6% Scandinavia 3% US 3% Source: Natixis. Flash 2010/218.
By institution
Banks 45% Fund managers 19% Pension funds 14% Asset management 10% Hedge Funds 5% Central Banks/governments 5%
Conclusion: The Broader Picture in the Euro Area
The Greek consolidation and reform program as developed and imposed by the IMF and the DG Ecfin is contradictory. Despite tough sacrifices being demanded from Greece, the policy program will not address the key problem of getting sovereign debt dynamics under control. At the same time, with a policy of generalized cuts in the pipeline (public sector cuts, pension cuts and cuts in private sector wages), Greece could fall into a period of prolonged stagnation coupled with deflation.
However, since Greece is a member of the Euro Area, there is a risk that the stagnation and deflation imposed on Greece may spread through the rest of the currency union. Financial speculation has spilled over into the rest of the Southern periphery of the Euro Area in the aftermath of the Greek crisis. Euro Area governments together with the European Central Bank decided over the weekend of May 10 to set up a European Financial Stability initiative. Its logic is identical to the Greek adjustment policy exercise: In return for financial support (possibility of 750 billion euro bilateral loans, ECB directly buying sovereign debt) to financially distressed governments, Euro Area member states pledged to turn around their fiscal policy stance and introduce austerity measures.
A string of governments, including Spain, Portugal, Italy, France, and Germany, have announced ambitious cuts in deficit spending with public sector jobs and wages being a prime target. Meanwhile, the IMF is increasing verbal pressure on the issue of more wage and labor market flexibility (see for example the conclusions from the article 4 IMF mission Euro Area). The biggest cuts announced so far have been in Spain, where the government already decided to cut public sector wages by 5% and to raise the age of retirement. If Spain would indeed be forced to apply to the European Financial Stability Initiative to get access to European money, the IMF and DG Ecfin would get an opportunity to deliver a powerful blow to those labor market institutions (public services, social benefits, collective bargaining, minimum wages) on which the European Social Model rests. As is the case with Greece, this policy is also unlikely to get Spain’s finances in order, nor will it succeed elsewhere in the Euro Area. Extreme fiscal austerity is only likely to lead to prolong economic stagnation coupled with possible Japanese-style deflation.
References
International Monetary Fund. 2010. “Greece: Staff report on Request for Stand By Arrangement.” Washington, DC.
International Monetary Fund. 2010. “Mission Report on Euro Area Article 4 Consultation.” Washington, DC.
Organization for Economic Cooperation and Development. 2009. “Economic Outlook nr 86.” Paris.
European Commission. 2009. “Employment in Europe 2009.” Brussels.
read more
Click to access greece-imf-2010-07.pdf
The banks’ secret behind the Greek tragedy
29 June by Maria Lucia Fattorelli
Greece is facing a huge debt problem and a humanitarian crisis. The situation now is many times worst than it was in 2010, when the Troika – IMF, EU Commission and ECB – imposed its “bailout plan”, justified by the necessity to support Greece. In fact, such plan has been a complete disaster for Greece, which has had no benefit at all out of the peculiar debt agreements implemented since.
What almost no one talks about is that another successful bailout plan effectively took place at that time in 2010, although not for Greece, but in benefit of the private banks. Behind the Greek crisis there is a huge illegal bailout plan for the private banks. And the way it is being done represents an immense risk for Europe.
After five years, the banks got everything they wanted. Greece, instead, got into a real tragedy: the country has far deepened its debt problem, lost State assets as the privatization process was accelerated, as well as shrunk its economy drastically. Most of all, it has had an immeasurable social cost represented by the lives of thousands of desperate people who had their livelihood and their dreams impacted by the severe austerity measures enforced since 2010. Health, education, labor, assistance, pensions, salaries and all other social services have all been destructively affected.
The distribution of the Greek National Budget shows that debt expenses prevail over all other State expenses. In fact, the loans, other debt obligations, interests and other costs cover 56% of the budget:
In May 2010, at the same time all attentions were focused on the abundant announcements about the interference of the Troika in Greece, with its peculiar “bailout” plan, another effective bailout plan and a set of illegal measures to rescue the private banks was also being approved, but no attention was being paid on these ones.
In one shot, justified by the necessity to “preserve financial stability in Europe”, illegal measures were taken in May 2010, in order to provide the apparatuses that would allow the private banks to get rid of the dangerous “bubble”, i.e., the great amount of toxic assets – mostly dematerialized and non marketable assets – that loaded their off-balance sheets |1| accounts. The main objective was to help the private banks to transfer such problematic assets to the European countries.
One of the measures adopted to accelerate the exchange of assets from private banks and settle the bank crisis was the SMP program |2|, which allowed the European Central Bank (ECB) to do direct purchases of public and private debt securities on primary and secondary markets. The operation related to public debt securities is illegal under Article 123 of the EU Treaty |3|]. This program is one among several “non-standard measures” then taken by the ECB.
The creation of a “Special Purpose Vehicle” company based in Luxembourg was another very important measure to help transfer dematerialized toxic assets from the private banks into the public sector. Believe it or not, the European countries |4| became “partners” of this private company, a “société anonyme” called European Financial Stability Facility (EFSF) |5|. The countries committed with billionaire guarantees, which was initially set on the amount of EUR 440.00 billion |6| and then, in 2011, was raised to EUR 779.78 billion |7| . The real purpose of this company has been shadowed by the announcements that it would provide “loans” to countries, based on “funding instruments”, not real money. Utterly, the creation of EFSF was an imposition from IMF |8|, which gave it a support of EUR 250 billion |9|.
Together, the SMP and the EFSF represent a crucial complementary asset relief scheme |10| the private banks needed to conclude the public support that had been initiated in the beginning of the 2008 bank crisis in the United States and also in Europe. Since early 2009 they had been applying for more public support to discharge the excessive amount of toxic assets loading their off-balance items. The solutions could be either the direct government purchases, or the transference of assets to independent asset management companies. Both tools were provided by the SMP and the EFSF, and the losses related to the toxic assets are being shared amongst the European citizens.
The exchange of toxic assets from private banks to a company through simple transference, without payment and a proper buy/sell operation would be illegal according to the accountability rules. EUROSTAT changed these rules |11| and allowed, “liquidity operations conducted through exchange of assets”, justifying it by the “specific circumstances of the financial turmoil”.
The main reason the EFSF was based in Luxembourg was to escape from being submitted to international laws. Besides, the EFSF is also financed by the IMF, whose collaboration would be illegal, according to its own statutes. Although, the IMF also changed its rules in order to provide the EUR 250 billion collaboration to EFSF |12|].
According to the Act |13| that authorized its creation, the EFSF Luxembourg company could delegate the management of all funding activities; its board of directors could delegate their functions, and its associates Member States could delegate the decision-making related to guarantors to the Eurogroup Working Group (EWG). At that time, the EWG not even had a full-time President |14|. The German Debt Management Office |15| is the one who actually operates EFSF, and, together with the European Investment Bank, provide support to the operational functioning of EFSF. Its lack of legitimacy is evident, as it is actually operated by a diverse body. EFSF is now the major Greece creditor.
The funding instruments EFSF operates are the most risky and restricted ones, dematerialized, not marketable, such as Floating Rate Notes settled as Pass-trough, currency and hedge arrangements, and other co-financing activities that involve the British Trustee Wilmington Trust (London) Limited |16| as the instructor for issuing restricted type of not-certified bonds, which cannot be commercialized in any legitimate stock market, because they don’t obey the rules for sovereign debt bonds. This set of toxic funding instruments represent a risk to the Member States whose guarantees can be called to pay for all Luxembourg company financial products.
A large proportion scandal would have taken place in 2010 if these illegal schemes had been revealed: the violation of the EU Treaty, the arbitrary changes in the procedural rules by the ECB, EUROSTAT and IMF, as well as the association of Member States to the Luxembourg private special purpose company. All of that just to bailout private banks, at the expense of a systemic risk for the whole Europe, due the States commitment with billionaire guarantees that would cover problematic not marketable dematerialized toxic assets.
This scandal never took place, because the same EU Economic and Social Affairs Extraordinary Meeting |17| that discussed the creation of the “Special Purpose Vehicle” EFSF company in May 2010 gave a special importance to the “support package for Greece”, making it appear that the creation of this scheme was for Greece and that by doing so, it would ensure fiscal stability in the region. Since then, Greece has been the center of all attentions, persistently occupying the headlines of the main media vehicles all over the world, while the illegal scheme that has effectively supported and benefited the private banks remains on the shadows, and almost nobody talks about it.
The Bank of Greece annual report shows an immense increase of the “off-balance” accounts related to securities in 2009 and 2010, on amounts much greater them the total assets of the Bank, and this pattern continues on the following years. For example, on the Bank of Greece 2010 Balance Sheet |18|, the total of assets in 31/12/2010 was EUR 138.64 billion. The off-balance accounts on that year reached EUR 204.88 billion. In 31/12/2011 |19|, as the total balance assets summed EUR 168.44 billion; the off-balance accounts hit EUR 279.58 billion.
Thus, the transference of toxic assets from the private banks into the public sector has been a great success: for the private banks. And the Debt System |20| is being the tool to hide that.
Greece was brought into this scenario after several months of persistent pressure from the UE Commission about allegations of inconsistencies on the statistics data and the existence of an excessive deficit |21|. Step by step a big deal was created over those issues, until May 2010, when the Economic and Financial Affairs Council stated: “in the wake of the crisis in Greece, the situation in financial markets is fragile and there was a risk of contagion” |22|. And so Greece was submitted to the package that included the interference of the Troika with its severe measures under annual adjustment plans, an odd bilateral agreement, followed by EFSF “loans” backed on risky funding instruments.
Greek economists, political leaders, and even some IMF authorities had proposed that restructuring the Greek debt would provide much better results than that package. This was ignored.
Critical denounces about the super estimation of the Greek deficit – which had been the justification for the creation of the big deal around Greece and the imposition of the package in 2010 – were likewise ignored.
The serious denunciations made by Greek specialists |23| about the falsification of statistics were also disregarded. These studies showed that the amount of EUR 27.99 billion loaded the public debt statistics in 2009 |24|, because of untrue augmentation on certain categories (such as DEKO, Hospital arrears and SWAP Goldman Sachs). Previous years statistics had also being affected by EUR 21 billion of Goldman Sacks swaps distributed ad hoc in 2006, 2007, 2008 and 2009.
Despite all this, under an atmosphere of urgency and threat of “contagion”, peculiar agreements have been implemented since 2010 in Greece; not as a Greek initiative, but as conformed by the EU authorities and the IMF, attached to the accomplishment of a complete set of prejudicial economic, social and political measures imposed by the Memorandums.
The analysis of the mechanisms |25| inserted on those agreements show they didn’t benefit Greece at all, but served the interests of the private banks, in perfect accordance to the set of illegal bailout measures approved on May 2010.
First, the bilateral loan used a special account in the ECB by which the loans disbursed by the countries and KfW, the lenders, would go straight to private banks that held far-below par value existing debt securities. So, that peculiar bilateral agreement was arranged to allow full payment for those bondholders while Greece didn’t get any benefit. Instead, the Greeks will have to pay back the capital, high interest rates and all costs.
Second, the EFSF “loans” resulted in the recapitalization of Greek private banks and the exchanging and recycling of debt instruments. Greece has not received any real loan or support from EFSF. Through the mechanisms inserted on the EFSF agreements, real money never arrived in Greece, but only toxic dematerialized assets that fill the off-balance section of the Bank of Greece balance sheet. On the other hand, the country was forced to cut essential social expenses to pay back, in cash, the high interest rates and all abusive costs, and also will have to repay the capital it has never received.
We must look for the reason why Greece has been chosen to be on the eye of the storm, submitted to illegal and illegitimate agreements and memorandums, serving as the scenery to cover the scandalous illegal bailout of the private banks since 2010.
Maybe this humiliation is related to the fact that Greece has been historically the worldwide reference for humanity, as it is the cradle of democracy, the symbol for ethics and human rights. The Debt System cannot admit those values, as it has no scruple to damage countries and peoples to obtain their profits.
The Greek Parliament has already installed the Truth Committee on Public Debt and gave us the chance to reveal those facts; so necessary to repudiate the Debt System that subjugates not only Greece, but also many other countries under the exploitation of the private financial sector. Only through transparency the countries will defeat those who want to put them on their knees.
It’s time for the truth to prevail, the time to place human rights, democracy and ethics over any lower interests. This is a task for Greece to take on right now.
Footnotes
|1| Off-balance means a section outside of the normal balance sheet accounts, where the problematic assets, as the dematerialized not marketable assets are informed.
|2| Securities Markets Programme (SMP) – EUROPEAN CENTRAL BANK. Monetary policy glossary. Available from:
https://www.ecb.europa.eu/home/glossary/html/act4s.en.html#696 [Accessed: 4th June 2015]
|3| THE LISBON TREATY.Article 123. Available from: http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html [Accessed: 4th June 2015
|4| The euro-area Member States or EFSF Shareholders: Kingdom of Belgium, Federal Republic of Germany, Ireland, Kingdom of Spain, French Republic, Italian Republic, Republic of Cyprus, Grand Duchy of Luxembourg, Republic of Malta, Kingdom of the Netherlands, Republic of Austria, Portuguese Republic, Republic of Slovenia, Slovak Republic, Republic of Finland and Hellenic Republic
|5| The private company EFSF was created as an instrument of the EUROPEAN FINANCIAL STABILISATION MECHANISM (EFSM), as in: http://ec.europa.eu/economy_finance/eu_borrower/efsm/index_en.htm
|6| EUROPEAN COMMISSION (2010) Communication From the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the Economic And Social Committee and the Committee of the Regions – Reinforcing economic policy coordination.
http://ec.europa.eu/economy_finance/articles/euro/documents/2010-05-12-com(2010)250_final.pdf – Page 10.
|7| IRISH STATUTE BOOK (2011) European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. Available from: http://www.irishstatutebook.ie/2011/en/act/pub/0025/print.html#sec2 [Accessed: 4th June 2015].
|8| Statement made by Mr. Panagiotis Roumeliotis, former representative of Greece at the IMF, to the “Truth Committee on Public Debt”, at Greek Parliament, on June 15th 2015.
|9| EUROPEAN FINANCIAL STABILITY FACILITY (2010) About EFSF [online] Available from:
http://www.efsf.europa.eu/about/index.htm and http://www.efsf.europa.eu/attachments/faq_en.pdf – Question A9 [Accessed: 3 June 2015].
|10| HAAN, Jacob de; OSSTERLOO, Sander; SCHOENMAKER, Dirk. Financial Markets and Institutions – A European Perspective (2012) 2nd edition. Cambridge, UK. Asset relief schemes, Van Riet (2010) Page 62.
|11| EUROSTAT (2009) New decision of Eurostat on deficit and debt – The statistical recording of public interventions to support financial institutions and financial markets during the financial crisis. Available from:
http://ec.europa.eu/eurostat/documents/2995521/5071614/2-15072009-BP-EN.PDF/37382919-ebff-4dca-9175-64d78e780257?version=1.0 [Accessed: 4th June 2015]
|12| “Most Directors (…) called for the Fund to collaborate with other institutions, such as the Bank for International Settlements, the Financial Stability Board, and national authorities, in meeting this goal.” In IMF (2013) Selected Decisions. Available from: http://www.imf.org/external/pubs/ft/sd/2013/123113.pdf – Page 72. [Accessed: 4th June 2015
|13| EUROPEAN FINANCIAL STABILITY FACILITY ACT 2010. EFSF Framework Agreement, Article 12 (1) a, b, c, d, and (3); Article 10 (1), (2) and (3); Article 12 (4); Article 10 (8).
|14| Only from October 2011 on, according to a Council Decision on April 26th , 2012, EWG has full-time president:
OFFICIAL JOURNAL OF THE EUROPEAN UNION (2012) Official Decision. Available from:
http://europa.eu/efc/pdf/council_decision_2012_245_ec_of_26_april_2012_on_a_revision_of_the_statutes_of_the_efc.pdf .
The same person, Thomas Wieser, had been the president of the Economic and Financial Committee (EFC) from March 2009 to March 2011: COUNCIL OF THE EUROPEAN UNION. Eurogroup Working Group. Available from:
http://www.consilium.europa.eu/en/council-eu/eurogroup/eurogroup-working-group/
|15| EUROPEAN FINANCIAL STABILITY FACILITY (2013) EFSF general questions. Available from:
http://www.efsf.europa.eu/attachments/faq_en.pdf – Question A6. [Accessed: 4th June 2015].
See also: Germany Debt Management Agency has issued EFSF securities on behalf of EFSF.
EUROPEAN FINANCIAL STABILITY FACILITY (2010) EU and EFSF funding plans to provide financial assistance for Ireland. Available from:
http://www.efsf.europa.eu/mediacentre/news/2010/2010-006-eu-and-efsf-funding-plans-to-provide-financial-assistance-for-ireland.htm [Accessed: 4th June 2015]
|16| Co-Financing Agreement, PREAMBLE (A) and Article 1 – Definitions and Interpretation “Bonds”. Available at http://crisisobs.gr/wp-content/uploads/2012/02/7-co-financing-agreement.pdf [Accessed: 4th June 2015]
These bonds are issued on dematerialized and not certificated form. Have many restrictions because they are issued directly for a certain purpose and not offered in market, as the Securities Laws and SEC rules determine. They are issued under an exception rule permitted only for private issuers, not for States.
|17| ECONOMIC and FINANCIAL AFFAIRS Council Extraordinary meeting Brussels, 9/10 May 2010. COUNCIL CONCLUSIONS
Click to access Conclusions_Extraordinary_meeting_May2010-EN.pdf
|18| BANK OF GREECE ANNUAL REPORT 2010. BALANCE SHEET p. A4 http://www.bankofgreece.gr/BogEkdoseis/Annrep2010.pdf
|19| BANK OF GREECE ANNUAL REPORT 2011. BALANCE SHEET p. A4. http://www.bankofgreece.gr/BogEkdoseis/Annrep2011.pdf
|20| Expression created by the author after verifying, trough several debt audit procedures in different instances, the misuse of the public debt instrument as a tool to take resources from the States, instead of supporting them, by functioning as a set of gears that relates the political system, the legal system, the economic model based on adjustment plans, the big media and corruption.
|21| 24 MARCH 2009 – Commission Opinion – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-05/2009-03-24_el_104-5_en.pdf
27 APRIL 2009 – Council Decision – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-06_council/2009-04-27_el_104-6_council_en.pdf
10 NOVEMBER 2009 – Council conclusions – http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111025.pdf
8 JANUARY 2010 – Commission Report – http://ec.europa.eu/eurostat/documents/4187653/6404656/COM_2010_report_greek/c8523cfa-d3c1-4954-8ea1-64bb11e59b3a
2 DECEMBER 2009 – Council Decision – https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111706.pdf
11 FEBRUARY 2010 – Statement by Heads of States or Government of the European Union. – http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/112856.pdf
16 FEBRUARY 2010 – Council Decision giving – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-09_council/2010-02-16_el_126-9_council_en.pdf
|22| 9/10 MAY 2010 – Council Conclusions – Extraordinary meeting – Under the justification of the “crisis in Greece”, the scheme measures to rescue banks are implemented.
Click to access Conclusions_Extraordinary_meeting_May2010-EN.pdf
10 MAY 2010 – Council Decision –
Click to access 2010-05-10_el_126-9_council_en.pdf
|23| Prof. Zoe Georganta, Professor of Applied Econometrics and Productivity, Ex member of ELSTAT board’s contribution to “The Truth Committee on Public Debt” 21 May 2015.
|24| HF International (2011) Georgantas says 2009 deficit was purposely inflated to put us in code red. Available from: http://hellasfrappe.blogspot.gr/2011/09/shocking-report-official-admist-2009.html
|25| The mechanisms are summarized on Chapter 4 of the Preliminary Report presented by the Truth Committee on Public Debt on June 17th 2015. Available from: http://www.hellenicparliament.gr/UserFiles/8158407a-fc31-4ff2-a8d3-433701dbe6d4/Report_web.pdf
To μυστικό των τραπεζών πίσω από την ελληνική τραγωδία
29 Ιουνίου 2015 της Maria Lucia Fattorelli
(Μετάφραση από την Ζωή Μαυρουδή)
ΕΔΩ:
http://greekdebttruthcommission.org/wp_GR/?p=107
Jo Di Graphics
Μου αρέσει η Σελίδα! · 12 ώρες ·
Πως η πρόκληση της ελληνικής κρίσης βοήθησε το ΔΝΤ.
Το 40% των κερδών του ταμείου από το 2010 (περί τα 3,6 δισ. €) προήλθαν από την Ελλάδα #Greece_saved_IMF