«Peoples of Europe», oil painting on canvas: Ivar Jørdre, 2011
How Greece went into the spiral of debt
Bankers loaned billions to the Greek government in the 2000s to gamble on rapid growth.
Greece was especially profitable, because the Euro tied its relatively weak economy to countries such as Germany.
But the banks tried to call in their debts after the crisis hit in 2007-08. The Greek economy shrank during the recession and tax revenues fell.
Fearing it wouldn’t pay back its loans, the bankers charged higher and higher interest rates. The bailout was really a bailout of these bankers.
The institutions made sure they got paid—most of the loan money went straight to them without paying for anything in Greece.
In 2010, the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF), later nicknamed the Troika, responded by launching a €110 billion bailout loan to rescue Greece from sovereign default and cover its financial needs throughout May 2010 until June 2013. But here is to add that a major player in this game of complicit lenders was the German chancellor Angela Merkel. She pushed forward this bailout for the German and French bankers in particular and because the German exports to Greece still was lucrative while opposite the Greeks had deficit in their export to them.
A year later, a worsened recession along with a delayed implementation by the Greek government of the agreed conditions in the bailout programme revealed the need for Greece to receive a second bailout worth €130 billion. in December 2012 the Troika agreed to provide Greece with a last round of significant debt relief measures, while the IMF extended its support with an extra €8.2bn of loans to be transferred during the period of January 2015 to March 2016.
After some economic growth in 2014, it was possible for the Greek government to regain access to the private lending market for the first time since eruption of its debt crisis – to the extent that its entire financing gap for 2014 was patched through a sale of bonds to private creditors. (Called private predators!) And here is an another problem with possible profits for creditors: When these buyers sees that they probably will loose the value of the bonds, they will do everything they can to have the money back, by restructuring them through the Troika. Who bails them out and but the burden on the Greek people by demanding tough economic structural programmes on the government. The same type of policy IMF had put countries in Latin-America and Africa, especially trough the 1980-ies and 90-ies.
After the election of a Syriza-led government refusing to respect the terms of its current bailout agreement, the Euro-group granted a further four-month technical extension of its current bailout programme to Greece; accepting the payment terms attached to its last portion of payment to be renegotiated with the new Greek government before the end of April, so that the review and last financial transfer could be completed before the end of June 2015. But at the same time the harsh Troika because their rising political uncertainty of what the Syriza-government would do or not do, made the Troika to suspend all scheduled remaining aid to Greece under its current programme – until such time when the Greek government either accepted the previously negotiated conditional payment terms or alternately could reach a mutually accepted agreement of some new updated terms with its public creditors. This «mutually accepted agreement» should here be understood as on the fiscal and economic terms of the Troika – AND NOT GREECE!
The new renegotiation deal was still pending by the end of May. Faced by the threat of sovereign default, which inevitably would entail enforcement of recessionary capital controls to avoid a collapse of the banking sector – and potentially could lead to exit from the eurozone due to growing liquidity constraints making continued payment of public pension and salaries impossible in Euro, some final attempts for reaching a renegotiated bailout agreement were made by the Greek government in June. Here the Greek people are today, up against the wall, waiting for what will happened. and also waiting for a referendum to be held on 5 July.
The battered Greek people have to approve or reject the achieved preliminary negotiation result (the latest counter proposal offered by the Troika on 25 June) for a new set of updated terms ensuring completion of the second bailout agreement. The Greek government signalled it would campaign for rejection of the new terms in the referendum. Still the Syriza-government made a last attempt to negotiate with several new proposals and unfortunately new accepts of bad conditions for the Greek people. But despite this the Troika negotiators turn it down. Thanks to this game battle in capitalism, the referendum probably will take place. With the hole of my political heart I do hope the Greek people will vote NO to the Troika’s not particularly tasteful attempt by use of austerity measures to get rid of an irritating leftist government within EU!
PEOPLES OF EUROPE AND GREECE – RICE UP AND REVOLT!