Greece: Depression or recession? Are the Troika bailing out or forcing under?

13 August 2013 by Jérôme Duval

Six years of recession, an impressive drop in GDP from €231 billion in 2009 to €193 billion in 2012, unemployment at 26.9% in April 2013 from 7.5% in 2008, 57% for the under 25s, and an explosion of suicide cases… This overview of Greece is catastrophic and alarming for the rest of Europe. As in Argentina in 2001, children are fainting in schools through lack of food. While seropositivity is on the increase, medical spending has dropped by 20% in two years, from 7.1% of GDP in 2010 to 5.8% in 2012. Meanwhile, the Nazi party, Golden Dawn, that sits in Parliament knows very well how to make the most of this social ruin to spread its hatred. The creditors have transformed recession into depression and the Troika (EU – IMF - ECB) darkens the picture all the time.

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.
’s attempts to maintain the credibility of its plan

All 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 efforts are now focused on a public debt target of 124% 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 2020. This fanciful objective is turning all the heads, so much so that the IMF (International Monetary Fund) adjusts its positions to keep this target in its sights. Should the Greek people accept a macro-economic objective that takes their well-being so little into consideration?

Beyond the infatuation with balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. deficit reduction, the IMF report on Greece, published at the end of July 2013, confirms that the Greek population is still writhing in the stranglehold of increasing public debt. The 2012 reduction to “only” 156.9% of GDP, from 170.3% the previous year, has been completely wiped out by a rise to close to 176% in 2013 [1].

Although it quietly recognises its resounding defeat in Greece, the Washington institution claims to have a new solution, based on growth previsions that are continually adjusted downwards. This “optimistic” scenario is founded on imaginary upturns in exports, investments and consumption that would, if realised, permit the attainment of the obsessional IMF goal of reducing public debt to 124% in 2020 and 110% in 2022. Yet this level of public debt will be no more than slightly inferior to 129.7% of GDP, the level of 2009: a comparatively small change over eleven years.

It is common knowledge that the economic policies applied by the Troika over the last three years have resulted in utter failure and tighter strangling of the population. The IMF is seeking new financial resources (privatisation receipts, reduction of costs by hacking away at social benefits, etc.) for the country so that it may continue to repay its creditors. The IMF estimates Greek public finance needs for the period 2014 – 2015 to be around €11 billion. More precisely, €4.4 billion at the end of 2014 and €6.5 billion for the whole of 2015. The creditors are insisting that the State repay them phenomenal sums whatever the consequences.

What is more: the IMF says that a new write-down of Greek public debt will be necessary within the next two years in order to bring it in line with the forecast drop to 124% of GDP by 2020. This easing will be about 4% of GDP, about €7 billion, to the cost of its European partners, without any guarantee of the success of the bail-out. Anyway, apart from the Troika and the Greek government, who still has any faith in the IMF?

Surprise twist and call to order

On 29 July 2013, the IMF Executive Committee approved a new advance to Greece of €1.72 billion. One of the loan conditions is a plan to lay off 4,200 public employees [2]. The Brazilian delegate to the IMF, who represents eleven countries mainly in south and central American, abstained. “Given the negative effects of the policies imposed on Greece and its population, the program ends up bringing risks to the integrity of the IMF,” he said. “It is important that the Fund prepare a new program for Greece, with better conditions, so as to allow the country to emerge from the crisis”, he insisted [3].

Even if these eleven developing countries are of insignificant weight in the IMF, having collectively only 2.61% of the voting rights, compared to the US which alone has a blocking minority of 16.75%, the incident kicks over a few tin cans. The Brazilian Minister of Finance, Guido Mantega, reassured Christine Lagarde that this would not happen again; Brazil supports the IMF action and its delegate was not mandated to abstain [4].

The minister “immediately” recalled his representative to ask for an explanation. Rather than having a submissive posture, and going beyond this diplomatic incident, Brazil could, if it had the political will, and especially as it has no current debt to the IMF, challenge the IMF’s policies. However the Brazilian delegate’s abstention was from lack of confidence in Greece’s ability to reimburse rather than a supportive gesture in defence of social justice.

Will the bail-outs force Greece under?

It must be well understood that the objective of the Troika’s bail-out of Greece is to impose a radical neoliberal programme while at the same time pushing the State into debt so as to definitively stifle any reaction by the government.

So this new IMF disbursement involves a vast programme to increase Greek debt towards the Troika. In fact Greece has just received a disbursement of €4 billion, on the 31 July 2013, from the European Union: €2.5 billion were paid by the Eurozone through the European Financial Stability Facility (EFSF), and a loan of €1.5 billion, to be repaid by 2048, was granted by the European Stability Mechanism 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.
(ESM), which is destined to replace the EFSF. This loan is generated by the central banks of the European countries who return to Greece 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. it has paid on its previously existing debt within the framework of the 2010 Memorandum. Is European liberalism going to push its cynicism as far as requesting interest on the interest paid by Greece? These are odious debts because not only are they linked to violations of human rights, but they also carry very high 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.
(about 5%). France and Germany find finance at 2% and enrich themselves on the backs of the Greeks to whom they lend at 5%.

In the wake of the closing of the Greek public television service [5], we find, in the conditionalities linked to loans, a new law concerning public employees, adopted on 18 July 2013 a few hours before German finance minister, Wolfgang Schaüble, visited Athens. For the duration of this visit Athens was transformed into a No Man’s Land under strict police surveillance. This law institutes massive redundancies among civil servants, in complete contradiction with the Greek constitution, and the sacrifice of thousands of employees who must work for eight months at reduced pay before being offered new “take it or leave it” employment contracts. In all, 4,200 persons are concerned: local police, teachers, school wardens and many others. A fiscal reform law voted on 25 July 2013 completes that of 18 July. In meagre compensation, the government obtained from the Troika a reduction of restaurant VAT to 13%, down from the 23% in force for over a year.

Among other measures, the Troika is intent on the privatisation of long-distance bus transport services, the Athens and Thessaloniki water distribution services, the DEPA gas company, the biggest oil refinery and distribution service (ELPE, Hellenic Petroleum S.A.), the national lottery, the football result prediction organisation (OPAP) and many more.

After its successive failures in turning around crises in Asia in 1997 (Thailand, Indonesia and South Korea) and elsewhere, the IMF continues its crusade against the sovereignty of the peoples of Europe using Greece as its guinea-pig. The latest declarations of the IMF claiming to want to review the harshness of austerity policies are worthless, while under cover of debt reduction it is prepared to do its worst as the Greek Nazi party looks on avidly. For an outcome favourable to the Greek people the debt to the Troika must be abolished, as it is odious [6]. Other illegitimate debts must also be abolished and the anti-social measures imposed since 2010 must be repealed. The Troika which is pushing Greece into a deadly humanitarian crisis must “clear off” and fast.

Translated by Mike Krolikowski and Vicki Briault.


[2Brazil Summons IMF Rep Home After Abstention on Greece Debt Vote. David Biller, Sandrine Rastello, Bloomberg, 1 August 2013.

[3This group, presided by Brazil, contains the Cape Verde Islands, the Dominican Republic, Ecuador, Guyana, Haiti, Nicaragua, Panama, Surinam, East Timor and Trinidad & Tobago.

[4“[Mr Nogueira Batista] did not consult the government, nor was he authorised by us to vote in this manner and the finance minister has ordered him to return to Brazil immediately to explain himself” Brazil’s finance ministry said.

[5CADTM press release, 14 June 2013, Greece, brutal takeover by the government and the Troika.

[6Renaud Vivien, Éric Toussaint, Greece, Ireland and Portugal: why agreements with the Troika are odious.

Jérôme Duval

member of CADTM network and member of the Spanish Citizen’s Debt Audit Platform (PACD) in Spain ( He is the author, with Fátima Martín, of the book Construcción europea al servicio de los mercados financieros (Icaria editorial, Barcelona 2016) and he also co-authored La Dette ou la Vie (Aden-CADTM, 2011), which received the award for best political book in Liège (Belgium) in 2011.



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