The Eurogroup of Finance Ministers meeting in Luxembourg on October 10th 2016 agreed to back the next bailout loan tranche to Greece of 2.8 billion Euros. Greece had had to meet the draconian terms demanded by the eurocreditors in the Memorandum of July 2015. As with all earlier bail out loans – most of the funds will be used to pay off interest on previous loans – The first 1.1billion Euros payment will be used for paying interest on debts and the further 1.7 billion will be used for clearing debt arrears. The question of easing Greece’s 311 billion Euro debt burden – worth 177% of GDP remains unresolved. Read more here.
Some critics have highlighted how the draconian terms of the 2015 Bailout Memorandum are leaving Greece a Debt Colony. In May an Omnibus Bill, covering many of the terms demanded in the Memorandum, was passed. It transferred control of all Greece’s public assets to a fund controlled by the European Stability Mechanism for the next 99 years. This includes all public infrastructure, harbours, public beaches and natural resources. The bill also annulled the Greek parliament’s power to set a national budget or pass tax legislation. These will be set by the EU. If fiscal targets set by the EU, the IMF, and the ESM are not met, automatic “cuts” will be activated, without any parliamentary debate, which could slash anything from social spending, to salaries and pensions.
The Greek people continue to endure never- ending austerity. Since 2010 when financial markets first realised Greece could never afford to pay its debt, the country has been subjected to a brutal regime of austerity. The economy has collapsed by 25%, unemployment is 27% (up from 8% before the crisis began) with youth unemployment of 50% and one-in-five now live in severe poverty. Eurozone governments, the European Central Bank (ECB) and International Monetary Fund (IMF) have lent more money which has been used to repay original reckless lenders rather than going into the Greek economy. Meanwhile, Greece’s overall debt has increased as its economy has stagnated because of the punishing austerity measures imposed as a condition of the loans.
The bailouts benefit the banks. As the Jubilee Debt Campaign points out: ‘Between 2010 and 2014, of the money lent by Eurozone governments, the ECB and IMF to Greece, 92% was spent on debt payments and bank bailouts, leaving less than 10% to be spent by the Greek government. Beneficiaries of these bailout loans included Greek banks, European banks, US banks, and various financial speculators such as hedge funds and vulture funds.’
‘Since 2010 when negotiations over the Greek bail-outs began, developing countries and debt campaigners warned that austerity would crash the economy, increase poverty and unemployment, and increase the relative size of the debt. This is exactly what happened.
The lesson from the debt crisis in developing countries in the 1980s and 1990s is that imposing austerity and refusing to offer significant debt cancellation could drag Greece’s crisis on indefinitely. Yet European decision-makers have ignored these inconvenient truths, and lessons from Greece’s own experience, and dished out a third portion of austerity medicine that will undoubtedly further ensnare Greece in the debt-austerity trap.’ Jubilee Debt Campaign : The Never-Ending Austerity Story.