The Evolution of the Discussion of the Greek Debt

A non-exhaustive overview of Greek press coverage of the debt since October 2015

22 March 2016 by Eva Betavatzi

CC - Flickr - Joanna

Since October 2015 when the Tsipras government decided to stop supporting the work of the Greek Debt Truth Commission initiated by Zoe Konstantopoulou, the debt issue, always present in some media, is approached with less intensity than before.

The Commentary on Public Debt has changed.

One would have thought that, following the departure of Zoe Konstantopoulou, former President of the Greek Parliament, and the Greek Government’s announcement that it was suspending the audit commission, the debt issue [1] would be put aside, as though gagged. This is partly what has happened. Even if it is no longer a central issue, as it appears to have been before the third memorandum was signed, it is still topical. The debt-debate resurfaces regularly in the Greek press, which frequently quotes what is said in the foreign press or by political or economic actors such as François Hollande or Christine Lagarde and even occasionally Tsipras himself.

At times the public debt, or rather discussion of its viability, appears to be an objective of the Greek Government. This objective is not shouted about loudly; far from it – it is a discrete aim, barely articulated. It is often brought up in the context of a statement setting out the government programme, as a final and essential stage of the continuous and inescapable process aimed at liberating Greece from austerity. Placed before its “creditors”, [2] the government says it considers the debt issue as an end that justifies the means; in other words, the new measures are part of “an effort” aimed, inter alia, at opening up discussion on debt-restructuring. [3]

However, the issue is no longer to put the illegitimacy, illegality or odious character of this debt on the discussion table; nor is the clear unsustainability of the debt, still occasionally evoked, truly at the heart of the concerns. The hypothetical restructuring of the debt would consist in redefining the repayment schedule and negotiating 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.
. [4] In any event, that was the situation some months ago. Today when Tsipras or a member of the government raises the public debt issue, no clear policy is announced on the matter.

Thus Tsipras has placed the debt issue, supposedly a predominant concern of the government, at the bottom of his list of priorities. An idea seems to be established that there are some necessary and indisputable stages to go through before coming to any discussion on the viability of the debt. These three stages are:
- Voting on and applying austerity measures such as those included in the agreement last August;
- Proceeding to evaluate the application of the memorandum;
- Obtaining tranches of aid [5] to finally find an agreement on the public debt.

Most European actors involved in the Greek austerity process defend this process. For example, when the French president visited Greece in October 2015, he stressed that the austerity measures had to be applied before any discussion on the debt could be entered into. Juncker, the President of the European Commission, said as much, adding that he would not participate in discussions on the debt because Germany had asked him not to meddle in these matters. [6] He nevertheless declared that they would not even discuss a partial write-off. More recently, Sigmar Gabriel, the German Vice -Chancellor and the Federal Minister for the Economy, announced that he “supported” Greece on the debt issue. He recalled that in the period 2010 – 2015, 145 of the 200 billion euros (74%) of financial aid allocated to the Greek government had been used exclusively to repay the debt; and he suggested seeking another way to reduce it. However, he has not failed to insist that debt reduction could only take place if the country applies the austerity measures “seriously”.

Other voices plead for public debt reduction. 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.
asks, publicly and very regularly, for a “serious” restructuring of Greek public debt; in other words for a reduction of the total debt, but only by European Lenders. The pressure that the IMF tries to impose is, on the one hand, offensive: if there is no serious discussion on debt-restructuring, it will end the aid programme. On the other hand, the financial institution balances debt restructuring with austerity measures, notably those relating to the social security system.

Indeed, at the beginning of February, Christine Lagarde emphasized that an excessively light reform of the social security system would result in the need for more significant debt restructuring. By saying that, she was advocating a reduction of pensions. This is not in doubt, because although the IMF suddenly appears as the champion of restructuring, something it categorically refused in 2010, its position is clear: Even if the Greek debt has to be reduced, that does not challenge the need for a radical reform of the pension system.

That there is a clear disregard for the full extent of the effect of the crisis on the population is highlighted by the fact that the IMF President makes these declarations at a time when Greece is experiencing an extremely serious humanitarian crisis, when the State is further reducing social protection that is already weak and inadequate, and where a large sector of the population assemble to denounce the new measures taken by the government after it signed the third memorandum.

The IMF, it is clearly understood, is not only concerned with the repayment of the Greek debt but also with implementing a neoliberal agenda. This is the only coherent explanation for its position. However Greece’s illegitimate and illegal debt has a devastating effect on society since it determines the majority of the decisions taken and produces new and ever-increasing pressure from the lenders. It is therefore difficult to understand why and how the question of a radical restructuring, even a total debt write-off, has been demoted to the bottom of Tsipras’s list of priorities.

The Debate Has Shifted Towards Private Debt

Today, the debate has shifted far more intensely to private toxic debt. The discussion focuses on two types of private debt:
- debt where the debtors are citizens who find themselves unable to repay or who do not pay their aggregate debts for the purchase of real estate;
- debt owed by private institutions, more specifically TV channels, that have not repaid (which does not necessarily mean that they were incapable of repaying), and do not seem overly concerned about it. [7]

Private debt relating to home purchases by individuals now unable to repay was the subject of a law passed in 2010, the Katseli Law. This law defined the parameters for repossessing principal residences. At the end of 2015, the Tsipras government and its creditors had discussed this at length. In the beginning, the creditors demanded that single individuals with an annual income of €8,500 or more and family households with an income of €12,000 or more, and where the value of the home amounted to at least €120,000, should have their property repossessed. The Tsipras government immediately rejected this proposition and subsequently suggested other figures: an annual income of €35,000 or more and where the value of the asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). would be not less than €300,000. [8] According to an article published on the ERT website, [9] the lenders’ suggestion was only going to save 17% of debtors whilst the Greek government proposal would have protected 72%. A compromise was found between these two proposals. More specifically, an agreement signed in November 2015 provides for the protection of 25% of households impacted by the 400,000 toxic debts at issue. The conditions are that the value of the debt be no more than €170,000 and that the annual income of the debtor be no greater than € 8,180 for a single person and €20,639 for a married couple with two or more children. These debtors will receive a housing allowance which will be used to repay their debt. The government has earmarked €100 million for this purpose. Households that are not included in the 25% of debtors covered by the agreement will not be protected. Those households not protected fall into two categories, as 35% may renegotiate the conditions for repaying their debt (but these conditions will be defined by the banks themselves!) whilst the remaining 40% of households will not be protected and will not be able to renegotiate their loan agreements.

Yet these negotiations have not touched on a series of important issues:
- the reduction of debtors’ revenue for reasons that stem from very specific situations for which they cannot be held responsible;
- the reduction in the value of their goods while at the same time the amount they owe remains static.

Furthermore, have the banks not been the beneficiaries of recapitalizations aimed precisely at covering losses created by private toxic debt?

Recently, another category of private debt has become subject to discussion: the debt of private national broadcasting television channels. Last November, Christos Karagianides, a Syriza MP, had asked the government to react in relation to loans to the media and large political parties amounting to € 5 billion, € 220 million of which concern the New Democracy and PASOK parties. Furthermore, it was with much cynicism that last November Adonis Georgiades, of the ND party, requested the cancellation of his party’s debt on the pretext that it was not sustainable!

The long-awaited reaction of the government has finally emerged and it has decided to reduce private channels’ broadcasting by half.

General pressure is building up on private debt. It is not astonishing that the government should attack private media, and specifically the TV, since they have been carrying anti-Syriza propaganda for several years. But does this gesture really demonstrate a desire for social justice? Is it really a means of making “top tax-avoidance experts”, pay their dues?

Even while taking these ever-cautious decisions, the government simultaneously votes in laws that are very hard on the Greek population, who are once again out on the streets protesting. We certainly do not seem to be moving towards a more just tax-system, nor towards greater social solidarity. And the Syrizia-Anel government cannot be allowed to bring the Greek people to their knees just as creditors have brought the Greek government to their knees in the name of a debt that the Greek Debt Truth Commission has demonstrated by numerous arguments to be illegitimate, illegal, odious and unsustainable.

Translated by Anoosha Boralessa (15 March 2016)
Revised by Mike Krolikowsky and Vicki Briault (CADTM)


[1The debt was the focus of discussions within Syrizia at least since the beginning of its first mandate.

[2The name “creditors” has replaced the names “Troïka” and “Institutions” used by the Papadimos and Samaras governments.

[3In the Greek Prime Minister’s Speech, austerity is part of the same effort aimed at leading the country out of the crisis. However before he had signed the third memorandum, he has always maintained that it was one of the causes of the crisis.

[4To find out more about debt restructuring, see the interview with Eric Toussaint on this subject:

[5These are called “doses” in Greek which very clearly marks the state of dependence established between the Tsipras government and its creditors.

[6Articles referring to the Junker Declaration appeared on the ERT site and The Press Project 5 November 2015.

[7For the moment, the Samaras government has not reacted to this situation. It preferred to close down the public channel ERT.

[8These figures appeared in a TVXS article in October 2015.

[9ERT is the radio and television media, essentially public, shut down by the Samaras government and reopened after Syrizia was first elected to head the government.

Eva Betavatzi

CADTM Belgique.

Other articles in English by Eva Betavatzi (7)




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