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.
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.
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 per cent of the money has reached the people of Greece.
Today the Greek government debt is still €317 billion. However, now €247.8 billion – 78 per cent 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.
When the ‘Troika’ programme began in 2010 Jubilee Debt Campaign warned that this was repeating mistakes made in developing countries in the 1980s and 1990s. Bailing out European banks rather than making them cancel debts would ensure the private speculators would get repaid, whilst the public would pay the costs of having to cancel debts in the future. Austerity would crash the economy, increase poverty and unemployment, and increase the relative size of the debt. This is exactly what has happened.
The combination of the crashing of the economy and the Troika debts means Greek government debt has grown from 133 per cent of GDP in 2010 to 174 per cent today.
The bailout and austerity programme did not take place because it was thought it would help the Greek people or reduce the size of the debt. It was done to save European and Greek banks and protect the profit of speculators.
In 2012, two years after the bailouts began, it was finally accepted that Greece needed some debts cancelling. An agreement was reached with many private creditors to cancel 50 per cent of the debt owed to them.
However, by this stage, the IMF, EU and ECB had been bailing out these reckless lenders for the previous two years, so many had already been repaid. None of the debts owed to the public institutions were included in the debt reduction.
Syriza is proposing debt cancellation through a similar conference (some have suggested of around 50 per cent, though there is no policy officially stated), with the remainder of the debt to be paid over several decades to ensure that Greece can continue to repay.
Even if Greece were forced out of the Euro, it could continue to use the currency, just as many countries use the US dollar without the approval of the US government. What other Eurozone members could do is withdraw European Central Bank lending to Greek banks, so that all Euros in circulation in Greece would have to already be there, or come from income from trade.
Whilst Syriza has said it will not unilaterally default on the debt, defaults tend to be economically beneficial for the country concerned.
The Greece and European debt crisis is the latest in a long-line of debt crises which have affected all continents since bank lending was liberalised in the 1970s.
In September 2014 a UN resolution was passed by 124 votes for to 11 against to establish a new legal framework for the debt restructuring process (such as a bankruptcy procedure for governments). The first negotiations in this process are taking place in early-February 2015.
These are excepts from ‘Six key points about Greek debt and the election’, by Tim Jones, Senior Policy and Campaigns Officer at the Jubilee Debt Campaign.
* The full briefing is here (*.PDF Adobe Acrobat document): http://jubileedebt.org.uk/wp-content/uploads/2015/01/Six-key-points-about-Greek-debt_01.15.pdf
* Jubilee Debt Campaign: http://jubileedebt.org.uk/
* More on Syriza from Ekklesia: http://www.ekklesia.co.uk/syriza