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
16 - Remember that the IMF board dismissed the objections of the
Argentine and Brazilian EDs, who had harshly criticized the IMF’s
position towards Greece
During
the meeting on 9 May 2010, Pablo Pereira, the Argentine
representative, openly criticized the past and present orientations
of the IMF:
“Argentina
has been through a very long and sad history of Stand-By Agreements
which were aimed at bailing out a debtor country but ended up
rescuing private sector creditors, leaving behind massive capital
flight and untenable social and economic consequences.”
“In
Argentina, we know too well what the real consequences are of making
believe that solvency crises are liquidity crises. Our own experience
proves that bail-out packages or debt restructurings that disregard
‘debt sustainability’ and economic growth as a main feature of
its design, leaving it to ‘future market access,’ are destined to
be short lived.”
“We
are also too familiar with the consequences of ‘structural reforms’
or policy adjustments that end up thoroughly curtailing aggregate
demand and, thus, prospects of economic recovery. The so-called
‘structural reforms’ promoted by the Fund hurt deeply countries’
institutional quality and capacity. We have reviewed the projections
of the staff, the recommendations and policy conditionalities. We do
not share the views, for instance, that the widespread cuts in public
expenditures, that a sharp decline in GDP, or that a major reduction
in replacement rates of the pension system (from average 75 to 60
percent) will solve the Greek solvency problem. If anything, such
measures risk to compound the problem.”
The
Argentine representative continues: “Harsh lessons from our own
past crises are hard to forget. In 2001, somewhat similar policies
were proposed by the Fund in Argentina. Its catastrophic consequences
are well known (…). Beyond economic theories, there is an
undisputable reality that cannot be contested: a debt that cannot be
paid will not be paid without a strong process of sustainable growth
(…); it is very likely that Greece might end up worst-off after
implementing this program. The adjustment measures recommended by the
Fund will reduce the welfare of its population and Greece’s true
repayment capacity.”
There
follows an excerpt from the declaration of the Brazilian Executive
Director concerning the absence of a restructuring process in the
programme: “As it stands, the program risks substituting private
for official financing. In other and starker words, it may be seen
not as a rescue of Greece, which will have to undergo a wrenching
adjustment, but as a bail-out of Greece’s private debt holders,
mainly European financial institutions.”
As for
the Argentine Executive Director, he declared: “Since this is
still a global systemic crisis, the strategy of squeezing public
financing and isolating the country blaming it for past fiscal
indiscipline or lack of competitiveness will most likely fail. [...]
A sound and equitable burden sharing of their costs would have been
good for the reputational costs of the Fund (that it could be blamed
for simply buying some time or ensuring that foreign banks will be
paid in full over the next year before the inevitable happens) and it
would have been even better for the Greek population and its growth
prospects.”
As a
consequence of the creditors’ refusal to agree to marking down
their Greek bonds, sovereign Greek debt rose from €299 to 355
billion between the end of 2009 and the end of 2011, an increase of
18.78%. Throughout 2010-2013, an unprecedented recession was
triggered by the policies dictated by the IMF and the other members
of the Troika. Not one of the IMF forecasts about the improvement of
Greece’s finances has ever proved correct. The results of the 2010
Memorandum completely discredit the optimistic predictions of the IMF
in particular and of the Troika in general.
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