The Bailouts Were for the Banks: Study Confirms Rescue Loans Didn't Serve Greeks

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The Bailouts Were for the Banks: Study Confirms Rescue Loans Didn't Serve Greeks

'The only reason why they effected this so-called bailout of Greece was to save their own banks and to present this as solidarity with Greece'

A sign held during a Syriza solidarity rally in London in Feb. 2015.  (Photo: Ben Folley/flickr/cc)

A new study offers more confirmation that the so-called bailout packages the European Union (EU) and the International Monetary Fund (IMF) delivered to Greece primarily served European banks rather than the Greek people.

The study released Wednesday by the Berlin-based European School of Management and Technology (ESMT) analyzed where funds from the two aid bailout deals—received on the condition of imposing harsh austerity measures—since 2010 went.

"Contrary to widely held beliefs," ESMT states, of the €215.9 billion (roughly $246 billion), less than 5 percent went to the Greek fiscal budget. The other 95 percent of the funds "disbursed to Greece since the start of the financial crisis as loans from the bailout mechanism has been directed toward saving the European banks," Ekathimerini reports.

Reporting by the German business newspaper Handelsblatt adds, "The aid programs were badly designed by Greece's lenders, the European Central Bank, the Europe Union and the International Monetary Fund. Their priority, the report says, was to save not the Greek people, but its banks and private creditors."

"Most of the money was used to actually transfer risks from private creditors to public creditors," ESMT President Jörg Rocholl told DW Wednesday. "This means money was used to repay the private creditors by taking on more debts that were taken by private creditors."

The report's findings echo the charge levied by other economists including Nobel Prize-winner Joseph Stiglitz and former Greek finance minister for the anti-austerity Syriza party, Yanis Varoufakis.

Speaking to Democracy Now! last week, Varoufakis said, "We had the largest loan in human history. The question is, what happened to that money? It wasn't money for Greece. It was money for the banks."

"And the Greek people took on the largest loan in human history on behalf of German and French bankers, under conditions that guaranteed that their income, our income in Greece, would shrink by one-third. That is Grapes of Wrath, John Steinbeck material. One-third of national income, poof, disappeared. So it was impossible to repay that money. And they knew that, in the first place. So the only reason why they effected this so-called bailout of Greece was to save their own banks and to present this as solidarity with Greece," he said. 

Asked by host Amy Goodman, "Ninety-one percent of the bailout went to German and French banks?"

"Well, the first bailout," Varoufakis replied. "The second bailout, 100 percent. And the third bailout, which I didn't sign, Amy, it was $85 billion. Of that, precisely zero will go to Greece. So, these are just typical extend-and-pretend loans."

Varoufakis, who said he was "elected to say no to the creditors[...] no to the extending and pretending, to the continuation of the depression," added:

What happened was very simple. In 2010, the Greek state went bankrupt, because it was part of a common currency area, a monetary union, that was simply not fit to the purpose of sustaining the great financial collapse of Wall Street, the city of London, the Frankfurt banks, the French banks, etc., and the Greek banks, and so on and so forth. So, there was a cynical transfer of private sector, private bank losses onto the shoulders of the weakest of taxpayers, the Greeks, knowing that those shoulders were weak, so weak that they wouldn’t be able to sustain that burden, and that burden would then be transferred to the shoulders of the German, the Slavic, the French taxpayers. And once they did this, it’s like Shakespeare, it’s like Macbeth: You commit one crime, then you have to commit a second crime to hide the fact that you committed the first one, and then a third one, and then a fourth one. And the second crime, of course, was the second bailout, because once the first bailout makes whole the bankers, then, within a few months, it becomes abundantly clear that the Greek state cannot sustain that loan. So, a second predatory loan is enforced upon the Greek government in order to pretend that it is making its payments for the first loan, and then a third one, and then a fourth one. And the worst aspect of it is that these loans, which were not loans to Greece, were given, extended, on condition of stringent austerity that shrunk our incomes. So we entered a debt deflationary cycle, a great depression, with no end in sight, and a great depression which sees—has absolutely no chance of a New Deal kind of solution like we had here in the United States in the 1930s, as long as the powers that be in Berlin—we heard the White House spokesman siding himself completely with Berlin—insist that this extending and pretending shall continue.

The anti-neoliberal globalization organization Attac Austria also released a report in 2013 which found that over three-fourths of bailout funds went to save banks.

"The goal of the political elites is not the rescue of the Greek population but the rescue of the financial sector,"Lisa Mittendrein of ATTAC said at the time. "They used hundreds of billions of public money to save banks and other financial players—and especially their owners—from the financial crisis they caused."

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