Who
Profited From the $440 Billion Greek Bailout? Not
Greeks
By Jack Rasmus
August 24,
2016 "Information
Clearing House"
- This week marks the first anniversary of the 2015
Greek debt crisis, the third in that country's
recent history since 2010. Last Aug. 20-21, 2015,
the 'Troika'—i.e., the pan-European institutions of
the European Commission (EC), the European Central
Bank (ECB), plus the IMF-imposed a third debt deal
on Greece. Greece was given US$98 billion in loans
from the Troika. A previous 2012 Troika imposed debt
deal had added nearly US$200 billion to an initial
2010 debt deal of US$140 billion.
That's
approximately US$440 billion in Troika loans over a
five year period, 2010-2015. The question is: who is
benefitting from the US$440 billion? It's not
Greece. If not the Greek economy and its people,
then who? And have we seen the last of Greek debt
crises?
One might
think that US$440 billion in loans would have helped
Greece recover from the global recession of 2008-09,
the second European recession of 2011-13 that
followed, and the Europe-wide chronic, stagnant
economic growth ever since. But no, the US$440
billion in debt the Troika piled on Greece has
actually impoverished Greece even further,
condemning it to eight years of economic depression
with no end in sight.
To pay for
the US$440 billion, in three successive debt
agreements the Troika has required Greece to cut
government spending on social services, eliminate
hundreds of thousands of government jobs, lower
wages for public and private sector workers, reduce
the minimum wage, cut and eliminate pensions, raise
the cost of workers' health care contributions, and
pay higher sales and local property taxes. As part
of austerity, the Troika has also required Greece to
sell off its government owned utilities, ports, and
transport systems at 'firesale' (i.e. below) market
prices.
Europe's Bankers Got 95 Percent of
Greek Debt Payments
The US$440
billion in Troika loans—and thus Greek debt—has not
been employed to benefit the Greek people, or to
help the Greek economy recover from its eight years
of depression; it has gone to pay the principle and
interest on previous Troika debt, as that debt has
been piled on prior debt in order to pay for
previous debt.
A recent
2016 released study has revealed conclusively where
all the interest and principal payments on the
US$440 billion debt has gone. It has gone directly
to European bankers and investors, and to the Troika
institutions of the EC, ECB, and IMF, who indirectly
in turn recycle it back to private bankers and
investors.
According
to the White Paper (WP-16-02) published by the
European School of Management and Technology, ESMT,
this past spring 2016, entitled "Where Did the Greek
Bailout Money Go?", more than 95 percent initial
Troika loans to Greece went to pay principal and
interest on prior Troika loans, or to bailout Greek
private banks (owned by other Euro banks or indebted
to them), or to pay off European private investors
and speculators. Less than 10 billion euros was
actually spent in Greece.
The ESMT
study further estimates the most recent, third Greek
debt deal of last Aug. 2015 will result in more of
the same: Of the US$98 billion loaned to Greece last
year, the study projects that barely US$8 billion
will find their way to Greek households.
The Cost to Greece Eight Years Later
In exchange
for the 95 percent paid to the Troika and
banker-investor friends, the austerity measures
accompanying the Troika loans has meant the
following: Greece's unemployment rate today, in
2016, after eight years is still 24 percent. The
youth jobless rate still hovers above 50 percent.
Wages have fallen 24 percent for those fortunate
enough to still have work. The collapse of wages is
due not just to layoffs or government and private
business wage cutting, both of which have occurred
since 2010, but is due also to the shifting of full
time to part time work. Full time jobs have
collapsed 27 percent, the lowest ever, while part
time jobs have risen 56 percent, to the highest
ever. The poorest and most vulnerable Greek workers
and households have seen their minimum wages reduced
by 22 percent since 2012, on orders of the Troika.
And pensions for the poorest have been reduced by
approximately the same. All that to squeeze Greek
workers, households and small businesses in order to
repay interest on debt to the Troika, to Europe's
bankers, and private investors.
None of the
debt, austerity, depression, and collapse of incomes
existed before the Troika intervened in Greece
starting in 2010. Greece's debt to GDP was around
100 percent in 2007, about where it had been every
year for the entire preceding decade, 1997-2007. It
was no worse than any other Eurozone economy, and
better than most. Greek debt rose in 2008 to 109
percent due to the global recession, accelerating to
146 percent of GDP in 2010 with the first Troika
debt deal of US$140 billion. It then surged to more
than 170 percent in 2011, where it has remained ever
since as another US$300 billion was added in Troika
loans in 2012 and 2015.
Greece's
debt since 2010 is certainly not a result of Greek
government spending, which has fallen from roughly
14 billion euros to 9.5 billion in 2015, reflecting
Greece's deep austerity cuts demanded by the Troika.
Nor can it be attributed to excessive wages and too
many public jobs, as both these have declined by a
fourth as debt has accelerated. The debt is Troika
loans forced on Greece in order for Greece to pay
principal and interest on previous loans forced on
Greece.
And Still No Relief 2015-16
What
happened a year ago, in the third Troika debt deal
of Aug. 2015, was the same that happened in 2012 and
2010: US$98 bill more debt was added to Greece's
already unsustainable US$340 or so billion. In
exchange, last August Greece had to implement the
following even more severe austerity measures:
Generate a
budget surplus of 3.5 percent of GDP from which to
repay Troika debt-i.e. around US$8 billion a year.
Raise sales taxes to 24 percent, plus more tax hikes
on "a widening tax base" (i.e. higher taxes for
lower income households). Introduce what the Troika
calls "holistic pension reform"—i.e., cut pensions
up to 2.5 percent of GDP, or around US$5 billion a
year, and abolish minimum pensions for the lowest
paid and the annual supplemental pension grants.
Introduce a "wide range" of labor market reforms,
including "more flexible" wage bargaining, easier
mass layoffs, new limits on worker strikes, and
thousands more teacher layoffs as part of "education
reform". Cut health care services and convert 52,000
more jobs to part time. And introduce what the
Troika called a more "ambitious" privatization
program. And this is just a short list.
And How Has Greece's Economy Actually
Performed over the Past Year?
Greek
government spending since Aug. 2015 has further
declined by 30 percent as of mid-year 2016, except
for military spending that has risen by US$600
million. Since Aug. 2015, quarterly Greek GDP has
continued to contract on a net basis. Greek debt as
a percent of GDP has risen further.
There are
83,000 fewer full time jobs. (But 28,000 more part
time jobs). Youth unemployment rates have risen from
48.8 to 50.3 percent. Consumer spending has dropped
by almost 10 percent, as consumer confidence
continues to plummet, home prices deflate, and
business investment, exports, and imports all slow.
In other words, the Greek economy continues to
worsen despite the added US$98 billion Troika debt
and the more extreme austerity measures imposed a
year ago.
Is Another Fourth Greek Debt Crisis
Inevitable?
The answer
is "Yes." Greece cannot generate a 3.5 percent
surplus from which to pay the mountain of principal
and interest on its debt. Debt repayments in 2016 to
the Troika were relatively minimal in 2016. In
2017-18, however, greater debt repayments will come
due as Greece's inability to repay will no doubt
worsen, when the next Europe-wide recession hits,
which is likely in 2017-18 as well. The next Greek
debt crisis may erupt even before, as a consequence
of the current deterioration in Europe's banking
system in the wake of Brexit and the deepening
problems in Italy's and Portugal's banking systems.
Contagion elsewhere could quickly spill over to
Greece, precipitating another fourth Greek banking
and debt crisis.
An Emerging New Financial
Imperialism?
By imposing
austerity to pay for the debt the Troika since 2010
has forced the Greek government to extract income
and wealth from its workers and small businesses-i.e.
to exploit its own citizens on the Troika's
behalf-and then transfer that income to the Troika
and Europe bankers and investors. That's imperialism
pure and simple-albeit a new kind, now arranged by
State to State (Troika-Greece) financial transfers
instead of exploitation company by company at the
point of production. The magnitude of exploitation
is greater and far more efficient.
What's
happened, and continues to happen in Greece, is the
emergence of a new form of financial imperialism
that smaller states and economies, planning to join
larger free trade zones and 'currency' unions, or to
tie their currencies to the dollar, the euro, or
other need to avoid at all cost, less they too
become 'Greece-like' and increasingly debt-dependent
on more powerful capitalist states to which they
decide to integrate economically.
Neoliberalism is constantly evolving and with it
forms of imperialist exploitation as well. It starts
as a free trade zone or 'customs' union. A single
currency is then added, or comes to dominate, within
the free trade customs union. A currency union
eventually leads to the need for a single banking
union within the region. Central bank monetary
policy ends up determined by the dominant economy
and state. The smaller economy loses control of its
currency, banking, and monetary policies. Banking
union leads, of necessity, to a form of fiscal
union. Smaller member states now lose control not
only of their currency and banking systems, but
eventually tax and spending as well. They then
become 'economic protectorates' of the dominant
economy and State-such as Greece has now become.
For a deeper analysis of Greek debt and the emerging
new financial imperialism, see Dr. Jack Rasmus,
"Looting Greece: An Emerging New Financial
Imperialism," by Clarity Press, September 2016.
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