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The Troika’s Policy in Greece: Rob the Greek people and give the money to private banks, the ECB, the IMF and the dominant States of the Eurozone

On 20 August 2018, the Greek government of Alexis Tsipras, the IMF and the European leaders celebrated the end of the Third Memorandum.

On this occasion, the major media and those in power spread the following message: Greece has regained its freedom, its economy is improving, unemployment is on the decline, Europe has lent Greece 300 billion and the Greeks will have to start repaying that debt in 2022 or in 2032.

The main claims are completely unfounded as Greece remains under the control of its creditors. In compliance with the accords that the Alexis Tsipras government signed, the country must imperatively achieve a primary budgetary surplus of 3.5% which will force it to continue brutal policies of reduction of public spending in the social sector and in investment. Contrary to the dominant message that Greece will not begin to repay its debt until some time in the future, it should be clearly understood that Greece has been repaying considerable amounts constantly all along to the ECB, the IMF and to private creditors, and this prevents it from responding to the needs of its population.

by Eric Toussaint

Part 1 - 2005-2008: A very high increase in foreign bank credit in the Greek private sector

The complicit silence that conceals the situation of the majority of Greek people is scandalous: very serious studies indicate a sharp rise in the child mortality rate since 2010, and also in the mortality rate for the elderly (see https://dental.washington.edu/study-shows-how-austerity-devastated-greeces-health/. See also, in French, “Grèce : Le démantèlement méthodique et tragique des institutions de santé publique” (Greece: the systematic and tragic dismembering of the public health institutions), http://www.cadtm.org/Greeke-Le-demantelement-methodique). There are three times as many suicides as before.

In reality, the results have been utterly devastating for the Greek people in terms of the degradation of their living conditions and violation of their civic and political rights. If you look at it from the point of view of Greece as a State, there is no escaping that the successive governments since 2010 have abandoned the country’s political leadership to its creditors. Greece has become a protectorate of the dominant powers of the Eurozone, which behave as though in conquered territory.

It is also a flagrant economic fiasco, if you consider the official objectives of the three Memoranda imposed on the Greek people since 2010.

And lastly, it is also a failure for a large part of the international left who had placed all their hopes on the possibility that a left-wing government might succeed in bringing its country out of austerity and freeing it from subjection to the laws of Capital.

The present article will review some of the key moments of the Memoranda period and the one that preceded it.

From 2005, French, German, Dutch, Belgian, Italian, Austrian and British banks, (henceforth referred to in this text as banks of the Centre – as opposed to the Periphery, which consists of Greece, Portugal, Ireland, Cyprus, Spain, Slovenia and other countries of Central Europe and the Balkans), have greatly increased their credit to the Greek private sector. Between March 2005 and September 2009, loans from foreign banks to the Greek private sector were multiplied by about four. Between 2002 and 2009, Greek bank borrowings from foreign banks multiplied by 6.5. At the same time, foreign bank loans to the Greek government remained stable.

Which Western European banks lend so massively to the Greek private sector? They are mainly Hypo Real Estate (Ger.), BNP Paribas (Fr.), Société Générale (Fr.), the Crédit Agricole (Fr.), BPCE (Fr.), Commerzbank (Ger.), Deutsche Bank (Ger.), Royal Bank of Scotland (UK), ING (NL), RaboBank (NL), Intesa SanPaolo (Italy), Unicredit (Italy), Dexia (Belg.), KBC (Belg.), KA Finanz (Austria) and Erste Bank (Austria).

In a book published in 2016, Yanis Varoufakis, former Minister of Finance in the Tsipras government, describes the motivations of French, German (etc.) banks that lend massively within the Eurozone to countries of the European Periphery with their governments’ support. There follows an excerpt:

Once markets had come to believe that no one would ever leave the Eurozone, German and French bankers began to look at an Irish or a Greek banker as equivalent to a German customer of the same creditworthiness. It made sense. If the Portuguese, Austrian and Maltese borrowers all made their income in euros, why should they be treated differently? And if the risk involved in lending to particular individuals, firms or governments did not matter, as the loans would be dispersed throughout the known universe immediately after being granted, why treat differently prospective debtors across the Eurozone?

Now that the Greeks and the Italians earned money that could never be devalued again vis-à-vis German money, lending to them appeared to the German and to the French banks as equivalent to lending to a Dutch or German entity. Indeed, once the euro was invented, it was more lucrative to lend to persons, companies and banks of deficit member-states than to German or Austrian customers.

This is because in places like Greece, Spain and southern Italy, private indebtedness was extremely low. People were of course poorer than Northern Europeans, lived in humbler homes, drove older cars and so on, but nevertheless they owned their homes outright, had no car loan and, generally, displayed the deep-seated aversion to debt that recent memories of poverty engender. Bankers love customers with a low level of indebtedness and some collateral, in the form of a farmhouse or an apartment in Napoli, Athens or Andalusia.

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