Greece: the so called debt reduction is a sleight of hand

25 June 2018 by Eric Toussaint , Marie Brette

René Magritte - cc

Eric Toussaint interviewed by Marie Brette for TV5 Monde

Eric Toussaint, what do you think of the agreement between the Eurozone ministers? Has Greece got through the crisis?

E.T.: The crisis is not at all over. What’s more, from the point of view of the European leaders the situation is not particularly brilliant either. To claim a reduction of debt, when in fact it is a ten year delay in repayments to some of Greece’s European partners, is to seek to create an illusion. The sums due to 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.
, 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.
, 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.
and to private creditors are not concerned in the arrangement. They continue as usual. The IMF has made €5 billion in profits on Greek debt since 2010 and the ECB has made €8 billion. The measures that spread out repayments over a longer period are a consolation prize to the Tsipras government that has faithfully applied the hard austerity driven reforms demanded by the creditors over the last three years. Tsipras needs to be able to tell the Greek people that the austerity programme is finally working. At the same time the antisocial policies imposed by the creditors are to be reinforced. The Greek leaders wanted to show by the agreement made on 22 June that private investment funds Investment fund
Investment funds
Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity.
could safely purchase Greek securities after the end of august under full institutional guaranties.

Greece is the whipping boy for the European Union’s policies

What is the Greek economic situation?

E.T.: Appalling, the 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.
is about 30% lower than in 2009/10. Greece’s overall economic indicators are very poor. Three hundred and fifty thousand highly qualified young professionals have left for Germany, France and other North European countries. Not counting refugee arrivals in 2016-2017 the population is falling and is now expected to continue to fall, youth unemployment has risen to 40%. According to Eurostat 47% of Greek households are in arrears on at least one of their instalment policies and the bank repayment default rate is at 46.5%. Whether it is unemployment, the financial system or productivity the situation is very bad, and this is because of the policies imposed on Greece. Greece is the whipping boy for the European Union’s policies. The leaders wanted to show any Eurozone peoples who elect a radically left-wing government with a will to change and break with austerity that they will be severely punished!

What should have been done?

In 2010, the banking crisis should have been solved instead of keeping afloat banks that had taken enormous risks. Instead of injecting tens of billions of Euros to recapitalise them they should have been put in order and under public control. There are four banks in Greece that control 85% of Greek banking. The big French and German banks who had massively lent to the Greek private sector should have been left to assume the risks they had taken. As it was, they were bailed-out by the Greek government who borrowed the money from 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.

. Politically, when the Greek people chose, in 2015, to support a coalition that proposed important changes in social justice their democratic will should have been respected. Whereas, the democratic aspirations were systematically trodden down by the European authorities, very satisfied with Tsipras’ capitulation in the summer of 2015 when he signed the third memorandum that made the Greek crisis worse.

Should the debt have been written-off?

Greece is in third or fourth position in the World in armament spending compared to GDP (...) In early 2018 after Alexis Tsipras met Donald Trump, purchases of arms from the US for €1.6 billion were announce

E.T.: Certainly, it is done quite often. When Poland left the Warsaw Pact Warsaw Pact A military pact between the countries of the former Soviet Bloc (USSR, Albania, Bulgaria, Hungary, Poland, the German Democratic Republic, Rumania, Czechoslovakia). It was signed in Warsaw in May 1955, as a reaction to the Federal German Republic joining NATO. Albania withdrew in 1968 after Soviet intervention in Czechoslovakia. After the dislocation of the USSR, the Pact’s military organization was dissolved in April 1991. in the early 1990s its western creditors granted a 50% debt reduction. At about that time, Egypt took part in the first Golf war and so was granted a 50% debt write-down. After the American invasion of Irak in March 2003 Iraq was granted a debt relief of 80%. Important debt reductions have been taking place for decades. It was absolutely necessary to do the same for Greece. Of course, a citizens’ audit would be necessary to identify who was responsible, among the Greek parties and their lenders. Remember that Greece is in third or fourth position in the World in armament spending compared to GDP! The principal arms suppliers being... Germany, France and the US! In the first memorandum, in 2010, one of the one of the unaltered repayment schedules was armaments. This preference continues. In early 2018 after Alexis Tsipras met Donald Trump, purchases of arms from the US for €1.6 billion were announced.

Translated by Mike Krolikowski

Source: TV5 Monde

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 Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), 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, 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. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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