2nd newsletter of TroikaWatch

29 January 2014 by Troïka Watch

Overall situation

While the general outlook remains broadly unchanged, with the Troika still pushing for severe austerity and national governments continuing their acts of window-dressing, another important issue has become increasingly prominent: corruption. As we see major scandals in many European countries, corruption seems to be not only a national problem, but rather connected to the current crisis and the economic system. However, there are also positive developments: ongoing resistance spreads everywhere, not only on the national level, but also on the European one. In this context, many citizen’s movements are calling for a European week of action from 15 to 17 May. More information will follow soon, see the Blockupy website.

European level

When the last European Summit took place in Brussels, thousands of activists took to the street. The D19-20 citizen’s alliance, a broad coalition of NGOs, trade unions, farmers, students and people of all ages blocked crossroads to protest against austerity policies and the planned EU-US trade agreement TTIP.

The day was a success: not just the blockade, but groups who have never worked together before coming together, giving those who were hesitant impetus to join future mobilisations. It is also important in continuing the politicisations of Brussels, being home to the EU institutions and one third of 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.

IMF : https://www.ecb.europa.eu/home/html/index.en.html
. Domestic politics also responded, with a handful of politicians finally voting against the austerity laws. The media was also forced to report on TTIP.

While just a first step, the strength of D19-20 is in its diversity – public and private sector trade unions, milk producers, organic farmers, women’s groups, NGOs, artists and radio stations among others, and those involved are already looking to the next steps: future summits, European days of mobilisation, reaching out further to allies across the continent. We know that any pan-European mobilisation has to be rooted in strong local campaigns and fights, but it’s happening. Bit by bit, it’s happening, including here in Belgium. The full report on D19-20, in English, can be read on CEO’s website.

A study presented end of November 2013 by the European Trade Union Confederation (ETUC) highlights that current austerity policy is a breach of European law, because it is in contradiction with the EU’s charter of fundamental rights.

Serious doubts about the Troika’s austerity policies have also come up in the European Parliament; aninvestigation was launched, of which the final report will be presented before the European elections in May.

In addition, a group of European journalists investigated the consultancy firms that are hired by national governments to advise on the implementation of Troika policy: A multi-million euro business beyond scrutiny.


In Greece, unemployment peaks at an unprecedented rate of 27.8 per cent (youth unemployment at 57.9 per cent) and government debt Government debt The total outstanding debt of the State, local authorities, publicly owned companies and organs of social security. is at 170 per cent 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.
. Since the outbreak of the crisis, real estate values have dropped by 32 per cent, while the lack of access to liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. (lending on the capital market) continues to strangle the real economy. New predictions of a Grexit are widespread, and according to the Economist, Greece has a very high risk of social unrest in 2014. Meanwhile, EU-elites celebrated the start of Greece’s EU presidency in Athens.

After a vote on two new property laws – one about property taxes and another about foreclosures (evicting people from their own homes) – yet another deputy was kicked out of the conservative fraction in the Greek Parliament because he voted against these laws. The ruling parties now only have a razor-thin majority of 153 out of 300 seats. While a moratorium on foreclosures for primary houses with a value of less than 200,000 euros for low-income families was extended, for all other properties this ban was lifted – meaning that Greeks can still get evicted from their house if it is worth more than 200,000 euros.

Before the new laws on property were passed by the Parliament, farmers, who fear higher taxes on their land, protested in Athens. With regards to the health sector, protests were partially successful; a planned fee on hospitalisation was replaced by higher taxes on tobacco. Taxes are also very high on energy, which causes air pollution in the cities, as people are forced to heat their houses by burning wood.

Several politicians, businessmen and high-ranking officials in the military are involved in a spectacular bribery case. Foreign companies including German Atlas, Rheinmetall and Wegmann, but also enterprises from Sweden and Russia, are accused of paying sums for arms deals that count up to millions. Swiss banks are involved as well, being accused of money laundering. In another fraud scandal, 25 people are accused of having swindled Hellenic Postbank, by channelling 500 million euros via fraudulent credits to their own bank accounts. Some people deem these investigations as a positive turnaround in the fight against corruption.

However, there is evidence that the working conditions of people investigating these cases are problematic, potentially affecting the quality of their research. German daily Süddeutsche Zeitung reported that investigators sometimes have to work from home because they have no office, and they also have to buy their own computer equipment.

Not surprisingly, confidence in the future and in public institutions is at a lower level than ever, while according to a recent poll of the TO VIMA newspaper 55 per cent of Greeks would like to leave their country.


In December 2013, Ireland was the first country to leave the Troika agreement. However, austerity and surveillance continue. Attac Austria and Attac Ireland calculated the numbers behind the Irish bailout. The striking results: while Ireland received 67.5 billion euros of bail-out loans, the country paid 89.5 billion euros to the banks. Next to that, Irish media are heavily criticized by a four-year’s study from University College Dublin: it showed that they have shamelessly been promoting austerity in the past few years. Further reading can be found in the article The Irish Media – Cheerleaders for Austerity.


Portugal’s debt at the end of the year 2013 counts up to about 125 per cent of GDP. The payment of 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. the country was due last year was around 3.5 per cent of GDP. This number will continue to rise if Portugal leaves the ESM ESM
European Stability Mechanism
The European Stability Mechanism is a European entity for managing the financial crisis in the Eurozone. In 2012, it replaced the European Financial Stability Facility and the European Financial Stabilisation Mechanism, which had been implemented in response to the public-debt crisis in the Eurozone. It concerns only EU member States that are part of the Eurozone. If there is a threat to the stability of the Eurozone, this European financial institution is supposed to grant financial ‘assistance’ (loans) to a country or countries in difficulty. There are strict conditions to this assistance.

program as planned. According to recent figures, Portugal would have to pay an interest rate of more than 4.6 per cent for a loan on the international capital market. Many believe that its debts remain unsustainable when the interest rate Portugal has to pay exceeds the growth rate of its GDP.

One of the conditions the Troika demands from Portugal, is a major privatization program. The Chinese company Fosun will buy the assurance branch of CGD, one of the biggest banks of Portugal that is still public property. Portugal’s constitutional court once again rejected pension cuts planned by the government as part of the austerity measures. However, the government does not seem to care much about this judgement: it still intends to go after the pensions, this time declaring that it is not a cut, but a tax. Opposition parties immediately stated their intention to challenge this again at the constitutional court, together with other measures such as cuts in salaries, bereavement benefits and in unemployment and sickness benefits.

Strikes against cuts and privatization plans continue. When garbage workers in Lisbon went on strike against the privatization of their company, calls circulated on the internet in which people were asked to bring their garbage to the banks.

Garbage in front of banks in Lisbon

At the beginning of January, Portugal’s president Anibal Cavaco Silva announced a legal inquiry into the austerity policies the country is forced to carry out by the Troika.


On the 14th of December 2013, a major anti-austerity protest took place in Nicosia, the capital of Cyprus. Several thousands of people marched from the ministry of Finance to the presidential palace. Like several other countries, Cyprus now also has a corruption scandal: it appeared that obscure property deals were concluded with money from the pension fund Pension Fund
Pension Funds
Pension funds: investment funds that manage capitalized retirement schemes, they are funded by the employees of one or several companies paying-into the scheme which, often, is also partially funded by the employers. The objective is to pay the pensions of the employees that take part in the scheme. They manage very big amounts of money that are usually invested on the stock markets or financial markets.
of Telecom workers. While the crisis on the island is deepening, 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.

has warned [en] Cyprus that political support for the measures is ‘sputtering’ – no surprise, considering their consequences.


In 2013, Spanish GDP fell by 1.3 per cent, unemployment is now at 26.4 per cent, public deficit at 6.7 per cent and public debt over 100 per cent of GDP. A report on Spanish fiscal policies and its impact on debt states that, prior to the crisis, the public sector was running surpluses and had a public debt of only 40 per cent of GDP. The private sector on the other hand, had a debt of almost 400 per cent of the GDP.

When the crisis broke out, a great part of private debt could not be paid back and the banking sector was virtually bankrupt overnight. The only reason why it has not collapsed yet, is that 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. sheets are not corrected to their fair value: bank assets evaluations are predominated by opaque information, artificially high prices on the real estate market and, mainly, direct and indirect transfers to the banks – those ensured that banks could deduce 150 billion of losses from their accounts in six years.

The most recent measure to help the banking system, is the change in the treatment and guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). of deferred tax assets (DTA) when calculating bank solvency. The Spanish State has become a guarantor of DTAs, which means that when banks are having losses, which automatically generate DTAs, the Spanish state owes the bank with losses this ‘negative tax’. This amount of money given by the state can now be counted as capital, which allowed banks to add 30 billion of capital to their balance sheets at the end of this year – a burden to be carried by the state, and adding to the Spanish debt. The Spanish banks are far from healthy, despite what we hear from the authorities, and it is likely that we will see more measures like the ones discussed above in 2014.

Systemic corruption in Spain is being unravelled, involving bankers, politicians, trade union members and the royal family. The latest scandal relates to the former director of the bank Caja Madrid (now Bankia), who is accused of nepotism, poor management and a tendency to overspend. His management caused a gap in the bank’s balance sheets that endangered the entire Spanish banking system, pushing the Spanish government towards a bailout that citizens are now paying for through taxes and severe cuts in expenditure. A recent programme on prime time screened a full report on this issue.

Citizen’s collectives are making efforts to fight corruption in many ways, for example by creating citizen legal initiatives against bankers or against the preference participations scam.

The struggle against privatisation has also seen a success: a court recently decided to freeze the privatisation of six hospitals in Madrid. The ruling came in response to a lawsuit filed by the Afem doctor’s association, accompanied by widespread protests against the privatization process.

Another victory of civil disobedience, is the new occupation of an empty building by families (owned by CaixaBank), organised by the citizen Platform of Affected by Evictions (PAH), a citizen’s initiative that holds support from more than 80 per cent of Spanish society.

People in the city of Burgos have been rising up since mid January because of a construction plan for a boulevard. With 160 million euros of municipal debt, the City Council is promoting monumental projects that benefit construction companies, while the city counts 18,000 unemployed and there is an urgent need for social services. Support actions and mobilisations in more than 40 cities in Spain have taken place: consecutive days of neighbourhood assemblies, calm protests, riots and a common message “We want to participate in the decisions of our city”. The government has made no effort to listen to the people of Burgos if the boulevard meets their needs (another example of imposed policies versus participatory politics, which reminds us of the incidents of #DirenGezi Park in Turkey). Follow what is happening on Twitter: #GamonalResiste.


At the end of 2013, the unemployment rate among the youth passed 40 per cent, while general unemployment is around 12 per cent. Italy has, according to Eurostat, the second place in the eurozone after Greece for the risk of social exclusion, with 18.2 million people at the risk of poverty (almost 30 per cent of the population).

At the end of the year, the Italian government voted on a ‘stability law’: a package of austerity reforms to be implemented in the course of 2014. It originates from the signing of the Fiscal Compact by the past ‘technocrat’ government of Mario Monti in 2012 (a government formed without elections under pressure of the European Union). When this law was accepted, the Italian parliament had to alter the Constitution by introducing a compulsory balanced-budget amendment in the text.

Every year, the measures will become more and more severe in order to fulfil the demands of the Troika. By 2014, the law requires a reduction of debt of 0.66 per cent of GDP. Starting in 2015, a cut of 1/20th of the Italian debt per year is required to achieve the thresholds imposed by the EU (a ceiling for public debt at 60 per cent of GDP, and a deficit of less than 3 per cent of GDP).

To fulfil these demands, a spending review was recently conducted led by Carlo Cottarelli, a former central banker and outgoing IMF senior official. This review stated that shares of major public enterprises like SNAM, ENI, Terna, Fincantieri, STM, Sace and ultimately the Italian Post and Railway system have to be sold to the private sector, and further cuts in the health system, local transportation systems and education have to be carried out. A stop on the recruitment of public employees was also put in place. By implementing these measures, the government intends to reduce expenditure by 32 billion euros, an amount that should be used for the reimbursement of debt.

With regard to social struggles, the autumn in Italy has been ‘hot’. There were many strikes and demonstrations, organized by trade unions and civil society movements. Recently, some students in Rome, Turin, Milan and Palermo protested against the cuts in education and all austerity measures in general, even though police repression is becoming increasingly violent.


Slovenia still fights to escape the Troika. After non-transparent stress testing of Slovenian banks, the state recapitalized three public banks at the sum of 3.012 billion euros, and urged owners of the five remaining privately owned banks to pour 1.7 billion euros into their banks. This bailout will increase the Slovenian public debt to 76 per cent of GDP. Along with the recapitalization Recapitalization Reconstituting or increasing a company’s share capital to reinforce its equity after losses. When the banks were bailed out by the European States, they were most often recapitalized with no conditions attached and without the States having the decision-making power their participation in the banks’ capital should have given them. , the transfer of toxic assets Toxic assets An asset that becomes illiquid when its secondary market disappears. Toxic assets cannot be sold, as they are often guaranteed to lose money. The term “toxic asset” was coined in the financial crisis of 2008/09, in regards to mortgage-backed securities, collateralized debt obligations and credit default swaps, all of which could not be sold after they exposed their holders to massive losses. of the state-owned banks to a so-called bad bank has begun.

Also in Slovenia, the word of the year 2013 is corruption. The presidency of the Commission for the Prevention of Corruption announced in January 2013 that they would resign if no changes followed a striking corruption report on the leaders of the two biggest political parties in Slovenia – Janez Janša (SDS) and Zoran Jankovič (PS). At the end of November, the Commission resigned [en], denouncing the failure of politics to tackle systemic corruption in the banking and energy sector, as well as a lack of willingness to improve anti-corruption legislation.

Moreover, the Minister of the Interior Gregor Virant announced that the legal probe into the Slovenian banking system will focus on 346 million euros of suspected fraud, with reports already filed of over 70 million euros. This was followed by a massive police operation targeting corruption in public healthcare, one of many forms of the corruption that has been blooming across Slovenia.

The resignation of the Commission for the Prevention of Corruption and the results of the bank’s stress tests resulted in some 400 people taking to the streets of Ljubljana, to protest the state of corruption. Protesters demanded more powers for the anti-corruption Commission, an immediate stop to the privatization programme and a genuine effort from Slovenian politicians to fight corruption. This protest was supported by many groups that were established in the 2013 wave of protests in Slovenia.

From outside

Many people helped us to spread the word about our first newsletter. We want to thank you for that, and please continue doing so! What made us especially happy, was noticing that our newsletter was translated to several languages by other organisations – for example Catalan, Polish, Dutch. Lots of people added our feed to their website, forwarded our e-mail version, twittered our newsletter or shared us on Facebook. We also got in touch with other projects that do work similar to ours, such as Crisis Watch and Who’s Saving Whom. Some other websites asked us for a banner exchange. We hope to have a banner soon and will get back to you! And last but not least, some new people joined our team from Slovenia and Italy.

TroikaWatch is created by a diverse group of people: some of us work for civil society organisations like the Bretton Woods Project, CEO, CADTM, Humanitas or TNI, others are activists in networks such asAttac,ICAN, the Forum per una Nuova Finanza Pubblica e Sociale or the Spanish 15M social movement.

We plan to publish this newsletter once or twice a month in English, Dutch, French, German, Greek, Italian, Portuguese, Slovenian and Spanish. You can subscribe to this newsletter at www.troikawatch.net/lists/?p=subscribe&id=1 and contact us by sending an email to info at troikawatch.net. On Twitter, you can follow the debate by using hashtag #TroikaWatch.

Greetings from Amsterdam, Athens, Barcelona, Berlin, Bruxelles, Florence, Frankfurt, Kopenhagen, Liège, Lisbon, Ljubljana, London, Barcelona and Thessaloniki.
The TroikaWatch Team

Source: http://www.troikawatch.net/2nd-newsletter-of-troikawatch/



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