To
protect themselves, the creditors went so far as to include a clause
guaranteeing that Greece will have to honor its obligations even if
the agreements are proven to be illegal!
by
Olivier Bonfond , Renaud Vivien
Under the
Securities Market Program (SMP) which lasted between May 2010 and
September 2012, the ECB purchased Greek bonds for less than their
face value on the secondary debt market, i.e. the “second-hand”
market where debt securities are sold and bought based on supply and
demand. Much like the vulture funds, the ECB paid € 40 billion to
buy Greek bonds from several private banks and is now demanding that
Greece fully repay their face value, that is, € 55 billion plus the
interest.
Another
inherent feature of the vulture funds’ strategy is that they
systematically refuse to partake in debt restructuring schemes. This
is also true of the ECB, which ruled out any participation in the
2012 Greek debt restructuring. It even exerted pressure to prevent a
debt reduction in 2010 although the debt was already unsustainable.
As stated by
Panagiotis Roumeliotis, a former representative of Greece to the IMF,
during a hearing before the Greek Parliament, the Frenchman
Jean-Claude Trichet, then President of the ECB, “was among the ones
who led the case against a debt restructuring by threatening to
starve Greece of cash. In reality, Mr. Trichet was bluffing in an
attempt to save the French and German banks”.
The goal was
to give them the time to be repaid thanks to the loan extended by the
Troika and to get rid of their Greek bonds on the secondary market
through the SMP. It is worth recalling that in 2010 the bulk of
Greece’s debt was in the hands of only 7 banks (3 French and 4
German banks); that was before the intervention of the Troika, now
renamed “the Institutions” – namely the IMF, the ECB, the
European Commission and the European Stability Mechanism.
The report
of the audit commission established that over 80 per cent of the €
240 billion in loans granted by the Troika in 2010 and 2012 went
directly back to repay around twenty private banks. A significant
share of the money never even reached Greek soil and simply passed
through an ad hoc account opened at the ECB. By allowing these banks
to remain immune from the bursting of the private-credit bubble they
themselves had created, this bailout of private creditors by public
institutions generated an illegitimate debt for the population.
A third
similarity with the vulture funds: the ECB took advantage of the weak
position of the debtor State to “negotiate” agreements that were
clearly unbalanced. The so-called Institutions imposed upon Greece
Memoranda which violate the rights of the Greek people and exacerbate
the debt burden. Even worse, they did it knowingly. In an internal
confidential document, the IMF wrote in March 2010 that the
Memorandum it was about to sign would have dire social consequences
and lead to a further increase in the Greek debt.
Moreover,
the agreements signed since 2010 include abusive clauses revealing
that Greece was forced to relinquish significant parts of its
sovereignty. British law, which is very protective of creditors (and
is given priority by the vulture funds), is now applicable in case of
dispute. Under these agreements, the State also commits itself to
fully forgo its immunity. In other words, Greece renounced any means
of defense against its creditors, who – just like the vulture funds
– can seize any assets belonging to the State as a form of
repayment. To protect themselves, the creditors went so far as to
include a clause guaranteeing that Greece will have to honor its
obligations even if the agreements are proven to be illegal!
Illegality
is indeed an issue. The austerity measures embedded in the Memoranda
directly violate several provisions of Greek, European and
international law. These violations engage the responsibility of the
Institutions, including the ECB, whose acts violate the rules of the
European Union and its own statutes.
For
instance, the SMP is conditioned on the implementation of austerity
measures, which is clearly a breach of its statutes and the principle
of “independence” of the ECB, enshrined in article 130 of the
Treaty on the Functioning of the European Union (TFEU). In engaging
in such political blackmail, the bank blatantly oversteps its
mandate, unlike the vulture funds, which are solely driven by profit.
Recently the
ECB also abused its power by stifling the Greek banks in order to
force the Syriza government to yield. Yet, as a central bank, it is
supposed to be the lender of last resort and take steps to avoid any
instability or bank run. Thus in that capacity it should have
provided the Greek financial institutions with the necessary funds.
All these actions and pressures by the ECB are irregularities that
nullify Greece’s commitments towards the institution.
Source:
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A contract to do something illegal cannot be brought before a court of law.
ReplyDeleteAdditionally, loans created among corrupt governments and oligarchs with power over the corrupt government are also unenforceable.