Greece: the European Central Bank answers the CADTM’s questions... or not

31 May 2016 by Anouk Renaud

CC - Flickr - William Murphy

In order to clarify the role of the European Central Bank (“ECB”) in the Greek financial system, four Members of the European Parliament from the European United Left–Nordic Green Left (GUE/NGL) [1] challenged the financial institution, with the assistance of the CADTM, relying in particular on the findings of the Commission’s first two reports regarding the truth about the Greek debt crisis. [2] The parliamentarians posed six questions. With no deadline, the ECB, in the person of its president, Mario Draghi, replied three months later. [3] The answer took up a page and a half. While less can be more, Mr. Draghi’s brevity is such that many of our questions simply remained unanswered.

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 violations of European law, particularly the European Charter of Fundamental Rights, were ignored. The UN Independent Expert on the effects of foreign debt stated in his latest report on Greece that: first, like all member states and institutions of the European Union, the ECB is required to comply with European and international law including the Maastricht Treaty (Article 2 and 3-3) [4] the Charter of Fundamental Rights of the European Union and the Universal Declaration of Human Rights. [5] Secondly, the implementation conditions of the Memorandum of Understanding, of which the ECB is a participant, directly violated the fundamental human rights protected by the Treaty of Rome and the aforementioned Charter. [6]

Similarly, there is no answer about the role that the ECB played, before 2010, of which the institution seems to have no memory. Is it not true that Greece has received only a fraction of the money promised in the MoU, which was actually transferred onto a special ECB account? Was the ECB concerned about the formation of a speculative credit bubble in Greece, fueled by European banks in the 2000s? Indeed, the influx of capital into Greece during this decade was impressive. The largest European banks (mainly French and German, but also Greek) [7] made huge profits by issuing loans in Greece. [8] Between 2001 and 2009, loans to households increased by 700% and those to companies by 400%, yet there was only a 20% increase in loans made to the government. Private debt rose from 74.1% of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
in 2001 to 129.1% in 2009. [9] Inevitably, as happened in Spain, the United States and Ireland, this speculative bubble Speculative bubble An economic, financial or speculative bubble is formed when the level of trading-prices on a market (financial assets market, currency-exchange market, property market, raw materials market, etc.) settles well above the intrinsic (or fundamental) financial value of the goods or assets being exchanged. In such a situation, prices diverge from the usual economic valuation under the influence of buyers’ beliefs. finally burst.

Mr. Draghi appeared to be most talkative in answering the question regarding profits made by the ECB through Greek government bonds. Beginning in 2010, the financial institution bought Greek debt securities 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. , through the SMP (Securities Market Programme). It therefore receives not only the principal repayment of these securities, but also 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. . When these profits, paid by Greece to the ECB, became known, the European states decided to return an amount, equivalent to the net profits realized, to Greece… on the condition that the country accepted the austerity policies. The ECB has washed its hands of any wrongdoing: Mr. Draghi states that the profits made by the ECB are transferred to national central banks, who then pay their shareholders, including their own respective governments. It is these States that are to decide to surrender or not surrender any profits. It appears that since 2013, Greece has not received any of this money, which is being held in an escrow account in Luxembourg (as chance would have it…) and which can only be released pursuant to a Eurogroup decision. [10]

Mentioning one of his previous statements, Mr. Draghi also asserted that “by passing on to Greece an amount equivalent to the income accruing to their national central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

from the SMP portfolio (which, as previously stated, has not been the case since 2013 [11] ), the euro area governments provided substantial support to Greece, in addition to providing loans at moderate 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.
.” [12] Obviously, we at the CADTM do not share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. the Frankfort based institution’s opinion. According to the European Commission, this “support” will result in a profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. of 7 billion euros for the ECB by 2018. [13] The ECB and the national central banks bought Greek bonds at discounted prices, then demanded full reimbursement proportional to the bonds’ initial value. As an extension of this generosity, they have refused to participate in Greek debt relief since 2012. There is support, yes, but in fact it is only for the private European banks; not only has the SMP program bailed them out of the Greek debt, but they have managed to be paid a much higher price than the market price.

The philanthropy of EU Member States appears boundless; in addition to the austerity measure conditions placed on Greek bonds, the surrender of profits is also being used as a weapon of extortion. Whether during the pseudo-negotiations of 2015, or those currently being conducted to ensure that the Third Memorandum is implemented.

As for other charitable acts offered to Greece by the European Union, Mr. Draghi cited the bilateral loans of 2010, whose interest rates were so low, they had to be revised… downward! Indeed, the cost of financing of European States is well below the interest rate charged to Greece. [14]

But the ECB does not stop there. Mr. Draghi justified the 2010 decision not to restructure the Greek debt by citing Greek statistics, which have been deemed unreliable. And for good reasons. It must be recalled, that at the time these faulty Greek deficit figures were compiled, the director of the Hellenic Statistical Authority (ELSTAT) had been directly chosen by Eurostat and the IMF IMF
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.
(an institution that illegally paid his wages). Despite several internal voices that challenged these figures, the falsification of statistics commissioned by the Greek Ministry of Finance has been widely ignored by both institutions. [15]

More recently, in 2015, the ECB did not hesitate to influence the negotiations between the Greek government and its creditors, in favor of the latter. This was in violation of Article 130 of the TFEU, as well as its own statutes, that prohibit any institution from interfering in politics. In February 2015, it denied the Greek banks access to the liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. tap; in June, it further smothered them, by lowering the total amount of emergency funds to which the banks have access. On the eve of the referendum, the vice president of the ECB, Vitor Constancio, even threatened to cut off all emergency liquidity should the desired vote not prevail. [16] Benedict Coeuré, a member of the ECB Executive Board, further stoked the flames, by stating in an interview, conducted in late June, that there was a possibility of excluding Greece from the Eurozone: “an exit from the Eurozone, so far entirely theoretical, cannot, unfortunately, be ruled out”. [17]

And when Mario Draghi is asked how he can explain such public speculation by several representatives of the institution he runs, he claims once again that “the irrevocability of the euro has been part of the EU framework since the Treaty of Maastricht”, and that consequently “the withdrawal of a Member State from the euro area is not foreseen in the Treaties”. [18]

Was it an unfortunate slip in communication? Probably not. Yet let’s grant the ECB the benefit of the doubt and be confident that it will properly admonish trespassers.

This ECB answer, that is as slim as it is dishonest, might be almost ludicrous if the adjustment policies enforced on Greece (also by the ECB) had not driven the country into a social and humanitarian crisis that has no precedent in times of peace. We know President Draghi is tired of our attempts at forcing transparence, yet, along with MEPs, we will ask the ECB more questions: Has Greece actually received 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.

’s loans? Can the ECB decide to restructure or indeed cancel the Greek debt bonds it holds? If not, why? As the ECB contributes to appointing executive officers of the HFFS, does it consider it a wise move to trust former bankers who are responsible for financial disasters with the consolidation of Greek banks? What kind of admonestation will Coeuré and Constancio receive for misleading public statements that disturbed the financial stability, which the ECB is expected to maintain?

Translation : Trommons and Christine Pagnoulle


[1The four parliamentarians were: Fabio De Masi, Miguel Urban, Sofia Sakorafa, and Nikolaos Chountis.

[4Article 2: “The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.”
Article 3-3: “The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.
It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child.
It shall promote economic, social and territorial cohesion, and solidarity among Member States.
It shall respect its rich cultural and linguistic diversity, and shall ensure that Europe’s cultural heritage is safeguarded and enhanced.”

[5Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of human rights, particularly economic, social and cultural rights - Mission to Greece, 29 February 2016). Page 7, point 21

[6Ibid., page 18-19, point 77

[7Including BNP, Société Générale and Crédit Agricole in France; Commerzbank, Baden Bank, Postbank and DZ Bank in Germany; and NBG, Agricultural Bank, Piraeus, EFG Eurobank, Hellenic Postbank and Alpha in Greece.

[8Also by being direct stakeholders in Greek banks, as in the case of Geniki (Société Générale) and Emporiki (Crédit Agricole).

[10Godin, Romaric. (2016) “Grèce : où sont passés les milliards de la BCE?” La Tribune, 22 March 2016. Available from:

[11Comment by the author of this article.

[12See Draghi’s reply to Liêm Hoang Ngoc, 12 March 2013,

[13 10_greece_art__13_eligibility_assessment_esm_en.pdf

[14Antonin, Céline. (2015) Le Sisyphe grec et sa dette publique : vers la fin du calvaire? OFCE le blog, 22 January 2015. Available from:

[15Pamela Colette & Bison Gwyneth. (2013) Statistiques et jiu-jitsu. Entretien avec Zoé Georganta. Revue Z, n°7.

[16The Truth committee on the Greek Public Debt (2015) Analysis of the legality of the August 2015 MoU and Loan Agreements. October 2015 Available from:

Anouk Renaud

Permanente au CADTM Belgique




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