ECB’s odious profits on the backs of the Greek people

17 October 2017 by Eric Toussaint

Mario Draghi recently acknowledged that euro zone central banks had accumulated €7.8 bn in profits thanks to the Greek bonds the ECB (European Central Bank) bought in 2010-2012 as part of the SMP (Securities Markets Programme). [1] To this must be added other amounts not mentioned by the President of the ECB : profits made by these same central banks as a result of ANFA (Agreement on Net Financial Assets purchases ) as well as profits made by the 14 countries in the euro zone that granted Greece a bilateral loan at an abusive interest rate of about 5% in 2010. Germany for instance has accumulated over €1.3 bn profits thanks to its bilateral loan to Greece. [2] France also is not far behind. The savings made by the dominant countries of the euro zone when refinancing their public debts must also be taken into account: the crisis that hit Greece and other countries of the periphery resulted in creditors turning away toward the richer countries in the euro zone, who, as a consequence, benefited from a decrease in the cost of borrowing. From 2010 to 2015, Germany saved €100 bn. [3] Finally in the context of Quantative easing (QE) the ECB bought €400 bn of German sovereign bonds, much at zero or negative return, and close to €400 bn of French sovereign bonds. While the purchasing of German or French bonds does not result in any profit, the Greek bonds it bought for a tenth of their value have realised € 7.8 bn. It is easy to see in whose interest the ECB implements such a policy.

The system is unrelenting: whenever a part of the ECB ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.
’s profits on Greek bonds has been transferred to Athens, the amount has immediately been used to repay creditors. Such plundering must stop. The profits made by the ECB on the backs of the Greek people must be returned to Greece and be entirely devoted to social expenditures in order to relieve the dramatic consequences of the policies imposed by the Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

, and to boost employment. The debt demanded from Greece must be cancelled. The findings of the Truth Committee on the Greek Debt, set up by the President of the Greek Parliament in 2015, show it to be illegitimate, odious, illegal and unsustainable. [4] The current memorandum must be rescinded.

Let’ s have a closer look at the the ECB’s policy towards Greece.

Act 1: The ECB’s role in the first Memorandum in 2010

When Jean-Claude Trichet (who is closely connected to major banks [5]) was Chairman, the ECB acted mainly to limit the losses of private French, German, Italian and Benelux banks that were exposed to both the private and the public sectors in Greece.

Contrary to what is endlessly repeated in dominant discourse, the main issue was the high risk of Greek private banks defaulting and subsequently dragging down their creditors and in some cases their owners, namely French, German, Italian or Benelux banks. [6]

Whilst the Memorandum of Agreement of May 2010 was being prepared, the ECB refused to reduce the Greek public debt, whereas, restructuring the debt is a usual part of “bail-out” programmes. This was in order to give the foreign banks of dominant euro zone countries time to reduce their exposition to the Greek public debt.

International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, then led by Dominique Strauss-Kahn(also close to the banking lobby Lobby
A lobby is an entity organized to represent and defend the interests of a specific group by exerting pressure or influence on persons or institutions that hold power. Lobbying consists in conducting actions aimed at influencing, directly or indirectly, the drafting, application or interpretation of legislative measures, standards, regulations and more generally any intervention or decision by the Public Authorities.
) adopted the same position as the ECB. The government of socialist PM Georges Papandreou was also concerned with defending the interests of Greek bankers and favoured a ‘bail-out’ programme that would bring in several tens of billions of euros to recapitalize them while avoiding a reduction of the Greek public debt. That would have badly affected the Greek bankers who themselves held Greek securities.

The second fundamental aspect in the direction taken by the protagonists that set up the Memorandum of Agreement was their determination to subject Greece to a shock therapy: drastic reduction of wages and retirement pensions, attacks against social rights, steep acceleration in privatisations, etc. By the same token Greece relinquished its national sovereignty and its Parliament became a mere rubber stamp for the decisions made by the creditors. Such objectives are not part of the ECB’s brief, which did not prevent it from imposing similar measures on several countries (in Ireland a couple of months later, in Italy too, not to forget Portugal and Cyprus).

Summary of Act 1.

The ECB steps in
1) refusing a reduction of the Greek debt so as to protect the interests of Greek and foreign private bankers, and
2) as part of a Troika that organizes the substitution of public creditors in the place of private creditors (in a first phase 14 member states of the euro zone for an amount of €53 bn and the IMF for €30 bn).

Act 2: The ECB made it possible for large private banks to withdraw from Greece

In its determination to substantially curtail foreign banks’ liability to the Greek debt the ECB launched the SMP programme through which it massively purchased Greek bonds on the secondary market Secondary market The market where institutional investors resell and purchase financial assets. Thus the secondary market is the market where already existing financial assets are traded. . The ECB bought Greek bonds held by the major banking institutions it wanted to protect (such as BNP Paribas, Crédit Agricole, Société Générale, BPCE, Hypo Real, Commerzbank, Dexia, ING or Deutsche Bank).

What would have happened if the ECB had not launched the SMP? The price of Greek bonds would have plummeted to some 20% of their face value. On the other hand the ECB’s massive purchasing maintained their price at an abnormally high level (around 70%). As a consequence, private banks were able to cut their losses when they sold the bonds. While the ECB is expected not to hinder the free interaction of market forces, its intervention resulted in a distortion of the bonds’ selling prices as they were kept at an artificially high value.

Was such intervention helpful to the Greek State? The fact that bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. values on the secondary market are maintained at 70% rather than plummet at 20% does not improve the debtors’ situation since they continue to pay exactly the same amount in interests, calculated on the bonds’ face value. When the bonds mature the borrower still repays 100% of the face value. We can even go further: if bonds of a state reach a bottom price, the said state can offer to buy back at around that low price and will no longer have to pay the interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. (this is what Ecuador managed to do in 2009 as it bought back bonds at 70% under par value [7]).

Act 3: The ECB benefits from the restructuring of the Greek debt in March 2012 and acts as a vulture fund Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.

In 2011, the ECB actively prepared a restructuring while arguing that as a senior creditor it would not be a party to it. The restructuring was prepared in close collaboration with the private banks of member states at the core of the euro zone (and notably Jean Lemierre from the BNP [8]). In November 2011, the Troika ousted Papandreou after he announced that he wanted to organize a referendum on the coming debt restructuring. The Papandreou government was replaced by a government of technicians led by Lucas Papademos, a former deputy president of the ECB from 2002 to 2010.

In March 2012, the restructuring that the ECB had set up involved a 53% reduction of the bonds’ values, to be supported by private creditors. Who were those private creditors at the time? On the one hand were the Greek banks, who, though they had reduced their exposure, [9] still had a significant amount of Greek bonds in their assets. They underwent a haircut but received several billion euros as a ‘sweetener’ and the guarantee that they would be recapitalized again. The main victims were the Greek public pension schemes that had been compelled by the Greek government and the Troika to convert their assets into Greek bonds shortly before the restructuring (which had been planned but was kept secret).

French, German, Italian and Benelux banks had sold their Greek bonds to the ECB, Cypriote banks and vulture funds. Simply put, the Cypriote banks were badly hit by the down grade and this contributed to the Cypriote crisis that broke out a few months later and its outcome in March 2013. The vulture funds that had bought at cut prices refused to take part in the restructuring and were paid the full face value for their bonds. The ECB had acted as a vulture fund and was also paid 100%.

Act 4: The ECB has been continuously blackmailing Greece

After the restructuring, the ECB put an end to the SMP and launched the Outright Monetary Transactions (OMT) programme.

The ECB was paid 100% of the value of Greek bonds with interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
that could reach 6.5%. This obviously abusive activity was exposed from several quarters including the Greek government, the ECB promised to repay the interest back to Greece. It did pay the Samaras government €3.3 bn in 2013 and 2014 to support its neoliberal policies. By contrast, during the first six months of the Tsipras government, it refused to make any repayments. Since January 2015, neither the ECB nor the euro zone national banks have made any payments to Greece. [10] The amounts owed today reach several billions of euros. [11] Repaying the Greek bonds held by the ECB is planned to last until 2037! [12]

Let us add that the ECB put maximum pressure on the Greek people over the first six months of 2015 to bring it to submission. On 4 February 2015, to put coercive pressure on the Greek government the ECB stopped the normal credit lines to Greek banks this increased the cost of money for Greek banks while, at the same time reducing the government’s resources. As this was not enough, the ECB closed the Greek banks six days before the referendum on 5 July 2015. Yet in spite of such blackmail by the ECB, 62% of the Greeks rejected the creditors’ demands.

In terms of making profits on the back of Greece, the IMF has held its own. From 2010 to 2015, it pocketed $3.5 bn profits on its loans to Greece. [13]

Conclusions :

  1. The ECB and the euro zone governments shirk their commitments to pay back to Greece all the interest gained on Greek bonds in excess of what they were entitled to.
  2. When bonds come to maturity, the ECB receives 100% of their value whereas it bought them at a 30% discount. The actual interest rates demanded from Greece are abusive.
  3. The ECB and other creditors used the promise of releasing the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of interests as a constant coercion to force the Greek government to introduce ever more neoliberal reforms that have dramatic consequences for the Greek people.
  4. Profits accumulated by the ECB, by the euro zone member states and by the IMF thanks to loans to Greece must be given back to the Greek people and be exclusively used for social expenditure so as to counter the dramatic consequences of the policies enforced by the Troika in Greece.
  5. The Greek debt must be cancelled and the current memorandum must be rescinded.

Translated by Christine Pagnoulle in collaboration with Mike Krolikowski


[1In Mario Draghi’s reply to MEP Nikolaos Chountis, former Syriza deputy minister in the first Tsipras governmen. Chountis is currently a member of the ‘Popular Unity’ movement, See also European Commissioner Pierre Moscovici’s answer to Chountis : Chountis’ question can be found here:

[3The Greek debt crisis has saved the German government some €100bn in lower borrowing costs because investors have sought safety in German bonds, a study has found.” in “Germany government gained from Greek crisis - IWH study”, 10 August 2015,

[4See the Preliminary Report of the Truth Committee on Public Debt,

[5See the case of the Crédit Lyonnais. In July 2002, Jean-Claude Trichet (then governor of the Banque de France and former Treasury director ), Jean-Louis Haberer (former CEO of Crédit Lyonnais) and Jacques de Larosière (former governor of the Banque de France) were tried in a criminal court for aiding and abetting in presentation of inaccurate accounts and spreading false or distorted information in the Crédit Lyonnais scandal. In June 2003, only Jean-Louis Haberer was sentenced but the acquittal of the two representatives of the supervisory authority was unconvincing. On 19 December 2016 Christine Lagarde, France’s former minister for economy and finance and current IMF general director, was sentenced by the Republic’s Court of Justice for “negligence” in the arbitration procedure in favour of Bernard Tapie, who was awarded €405 million of public money in 2008.

[6See Eric Toussaint, ’Banks are responsible for the crisis in Greece’, 9 January 2016, and Patrick Saurin, “La « Crise grecque » une crise provoquée par les banques”, 21 April 2016, (in French).

[7Video: The Ecuador debt audit, a seven minute summary and From Dashed Hopes to Success in Ecuador: the examples of South Africa, Brazil, Paraguay and Ecuador . See also : CAIC - Final Report of the Integral Auditing of the Ecuadorian Debt - Executive Summary,

[8See a. o. (the French entry is more complete than in English).

[9In absolute terms the Greek banks’ liability had somewhat decreased, partly because they had substituted for some of their bonds with a maturity of more than one year Treasury bills with a maturity of less than one year, which were not involved in the haircut.

[10La Tribune, « Dette grecque : les intérêts ont rapporté 8 milliards d’euros aux banques centrales », 12 October 2017,

[11Anouk Renaud had exposed this scheme in ’Grèce : la poule aux œufs d’or de la BCE’, 25 April 2017, (in French only)

[12See the detailed schedule of future repayments on the Wall Street Journal website

[13Dimitri Tzanninis, ’IMF substantial profits thanks to Greece (2010-2015)’,

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.




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