Wednesday, June 17, 2015

Greek deadlines

Spiegel Online has a graph showing the major payments Greece has coming due to the IMF and ECB over the next couple of months (Verhandlungen mit Griechenland: Österreichs Kanzler startet letzten Versuch 17.06.2015):

The June 30 payment due to the IMF of €1.6 billion is the main reason that some commentators are using June 30 as a critical deadline. But the current official Troika assistance program, whose payments to Greece are currently on hold, expires on June 30, as well. Ralph Bollmann writes that the ECB would not longer be able to provide emergency help to Greek banks after that. (Finale für Griechenland FAZ 14.06.2015)

Unless some temporary extension is found, of course. Which would mean that July 20's €3.5 billion payment due to the ECB would become the next major deadline on the horizon. There's also another €0.5 billion due to the IMF on July 13.

Jamie Galbraith in Bad Faith The American Prospect 06/16/2015 reminds us that the infamous 2010 Troika "bailout" involved solving the Greek debt crisis by ... adding a large new amount of Greek debt:

The original crime in the Greek affair, [Phillipe] Legrain said, was committed in May 2010, when it became clear that the country was insolvent. At that time, the IMF staff was convinced that Greek debts must be restructured, and that debt relief was not only necessary but also just, given that reckless borrowers are always matched to reckless lenders, and that lenders are compensated, in part, for the risk of loss.

Restructuring did not happen. Instead, a trio of Frenchmen — at the IMF, at the European Central Bank and at the Elysée, and backed by Angela Merkel — decided to pretend that Greece's problem was merely temporary, that there was a larger financial crisis to be warded off, and that the largest bailout in history should be directed not to save Greece, but to off-load the exposure of French and German banks onto all the European states, with Germany's taxpayers taking the largest share.

Why did the IMF get into the act, making its largest loan in history (32 times Greece's quota) over the reservations of its staff and the objections of many non-European members? Because the Managing Director at the time, Dominique Strauss-Kahn, wanted to become President of France.

At the same time, the European Central Bank under Jean-Claude Trichet bought up some 27 billion euros in Greek bonds, thereby raising their price. Why did Trichet do this? To support the original lenders, once again in large part the French banks. [my emphasis]
Also, this was a nice bit of European solidarity: "In 2010, the IMF representatives of France, Germany and the Netherlands promised (on that pretense) that their banks would hold on to their Greek debts. In fact, they sold off everything that that they could."

Galbraith reminds us that not all of the villains in this play are German:

Sympathetic American readers have become used to seeing Germany, the Germans, their Chancellor Angela Merkel, and her finance minister Wolfgang Schäuble as the villains in this drama. They have underestimated the half-hidden role of the Rasputins of Paris. And also that of the Svengali of Frankfurt, Mario Draghi, who as I write rumbles threats to the Greek banking system. These are threats that may, in the next few days, unleash the very avalanche that Draghi once promised to do whatever it takes to prevent. [emphasis in original]
Galbraith wrote back in 2011 (The crisis in the eurozone Salon 11/10/2011):

The eurozone crisis is a bank crisis posing as a series of national debt crises and complicated by reactionary economic ideas, a defective financial architecture and a toxic political environment, especially in Germany, in France, in Italy and in Greece. ...

Underpinning banker power in Creditor Europe is a Calvinist sensibility that has turned surpluses into a sign of virtue and deficits into a mark of vice, while fetishizing deregulation, privatization and market-driven adjustment. The North Europeans have forgotten that economic integration always concentrates industry (and even agriculture) in the richer regions.
The political environment today has gotten less toxic and more democratic in Greece and Italy, but even more toxic in Germany and France. At least when it comes to the euro crisis.

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