The third ‘bailout’ took place in 2015. It is the most well-known as it took place after months of salient negotiations with Greek minister of Finance Varoufakis, and after a referendum on 2015 July 5th, in which a majority of over 61% of Greek voters voted against the ‘bailout’. Varoufakis resigned on July 6th when it became apparent that then prime-minister Tsipras would accept the ‘help’ anyway. The troika had pressured the Greek government to do so by closing down Greek banks in the week prior to the referendum. That is, the ECB withheld liquidity and Greeks could withdraw a maximum of 60 euro a day. If Tsipras would not have budged, the ECB would probably have let the Greek banking sector collapse.
The ECB pressured the Greek government to accept yet another large loan from the ESM, because in 2015 Greece had to repay the bonds that the ECB bought in its SMP. Were Greece to default, the ECB and the IMF would have suffered from the creditor risk that they took on in 2010. To avoid that, the debt had to be moved completely to the ESM. And so it did in July 2015. In 2015 the Greek debt, now 180% of GDP, was transferred fully to the ESM. Not only banks got off scot-free. The IMF and the ECB were also fully repaid. Greece paid 3.5 billion in interest and fees to the IMF, equaling 79% of the IMF’s expenses. With its SMP the ECB made profits on Greek bonds of at least 7 billion euro. It promised to give that back to Greece. It never did.
In politics, there are no winners without losers. Among the losers are of course Greek citizens, who will have to repay the ESM until August 20th 2059. EMU-citizens also lost out. EMU-states lend to Greece via the ESM. Given that Greece was insolvent in 2010, and remains insolvent to this day, it will probably not be able to repay. More debt-restructuring as the one in 2018 will turn out to be inevitable. Losses will then fall on EMU-states, i.e. on EMU-citizens. The banks who made the loans and profited from them will not be hurt.
“With its SMP the ECB made profits on Greek bonds of at least 7 billion euro. It promised to give that back to Greece. It never did.”
The euro-crisis seemingly resided after 2015, and is in any case overshadowed by the pandemic. It will, however, not be over until 2059, when Greek citizens, most of them unborn in 2010, will have repaid the ESM to the fullest extent possible. And even if it’s over, the injustice of the operation taking place in 2010-2015 cannot be undone. The troika, including the ECB and the EC, operated as bailiffs on behalf of bank-creditors. It became apparent what it really means to give up monetary sovereignty. It means the use of and borrowing in a currency one does not control. Consequently, the ECB can make and break the public finance of any member state and it can sink any banking sector. It’s sad that the ECB will do exactly that to aid private banks.
First published Online. July 2020. Volume 15, Issue 3. Cartoon by Beattie (2010)