Hundreds
of billions of dollars in loans haven't helped the Greek economy or
its people
by
Jack Rasmus
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.
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