17.06.2013, Greek Bail-Out: 77% went into the Financial Sector


Attac investigation shows: EU crisis management policy saves banks, not the general population


LINK: German version

Since March 2010, the European Union (EU) and the International Monetary Fund (IMF) have applied 23 tranches comprising €206,9 billion to the so-called "Greek bail-out". They have however provided hardly any documentation on the exact usage of those huge amounts of public funds. ATTAC Austria has therefore put up an investigation on the issue: At least 77% of the bail-out money can directly or indirectly be attributed to the financial sector.

The results in detail:

  • €58,2 billion (28,13%) were used to recapitalise Greek banks – instead of restructuring the too big and moribund sector in a sustainable way and letting the banks' owners pay for their losses.
  • €101,331 billion (48,98%) went to creditors of the Greek state. €55,44 billion of these were used to repay maturing government bonds – instead of letting the creditors bear the risk for which they had received interest payments before. Another €34,6 billion served as incentive to make creditors agree to the so-called "haircut" in March 2012. €11,3 billion were used in a debt buyback in December 2012, when the Greek state bought back almost worthless bonds from its creditors.
  • €43,7 billion (22,46%) went into the national budget or couldn't be definitively attributed.
  • €0,9 billion (0,43%) were used as Greek contribution to the new bail-out fund ESM.

Sources: www.attac.at/uploads/media/backgroundmaterial_bailout_english.pdf

"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 concludes. "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."

Political elites distort public view of "rescue packages"
These findings refute the position publicly taken by European politicians that it is the Greek population who benefit from the so-called "rescue packages". They are rather the ones paying for the rescue of banks and creditors by suffering from a brutal course of austerity and its well-documented catastrophic social consequences.

Billionaires and hedge fund benefit
Among those actually rescued is the multi-billion Latsis clan, one of the richest families in Greece, owning large parts of the state-rescued "Eurobank Ergasias". (1) Speculators benefited, too: During the debt buyback in December 2012, the hedge fund Third Point pocketed €500 million with the aid of European public funds. (2) "When Barroso, the President of the European Commission, labels the so-called Greek bail-out an act of solidarity, you have to ask: Solidarity with whom?", Mittendrein comments. (3)

Another €34,6 billion in interest payments
A maximum of €43,6 billion (22,46%) of the so-called "rescue packages" went into the Greek national budget. However, this amount has to be seen alongside other state expenses during the same period which didn't benefit the general population. More than €34,6 billion were yet again paid to creditors as interest payments for outstanding government bonds (2nd quarter 2010 to 4th quarter 2012 (4)). Moreover, the Greek state put another €10,2 billion into military spending (2010 and 2011 (5)). According to insiders, the governments in Berlin and Paris pressure Greece not to cut military spending because that would affect German and French arms companies. (6)

Not the first bank bail-out
"The so-called Greek bail-out turns out to be another bail-out for banks and wealthy individuals", Mittendrein says. European banks have already received €670 billion of direct state support (not including guarantees) since 2008. (7) Still, the financial sector in Greece and all over Europe remains unstable. This is once again proven by the recent disbursement of two more tranches dedicated to bank recapitalisations comprising €23,2 billion since December 2012.

Political elites fail to implement needed regulations…
The Greek state's haircut hit local banks so hard that the state is forced to go into debt again to save them with a billion-euro bail-out. "In the five years that passed since the financial crash, Europe's politicians have failed to regulate the financial markets and adopt a bankruptcy regime for banks. So taxpayers are still forced to help out in case of losses, while the banks' owners are getting away scot free. The governments have to stop giving this kind of blackmailing opportunity to the financial sector", Mittendrein criticises.

…and rescue corrupt Greek banking sector
What's even worse is that billions of bail-out money go to Greek banks even though some of them only meet the official conditions by resorting to dubious methods. In 2012, a Reuters report exposed the banks' scandalous practices of using a Ponzi scheme of offshore companies to shove unsecured loans on to each other. They did this to appear to still be able to attract private capital and thus meet the conditions for state recapitalisation. (8) "While the European and the Greek political elites demand blood and tears from the ordinary Greek people, they turn a blind eye to the secret deals amongst financial oligarchs, who are in fact the main beneficiaries of the bail out money given to Greece”, confirms economist Marica Frangakis, a member of the Athens-based Nicos Poulantzas Institute, and a founding member of ATTAC Hellas.

Intransparent handling of public funds
"Our results reveal that the main goal of our governments' crisis management policy since 2008 has been to save the fortunes of the wealthiest. The political elites accept tremendous unemployment, poverty and misery – to save a financial sector beyond remedy. The Austrian government has taken part in this inhuman course of action for years, too", Mittendrein adds. It is furthermore alarming that those in charge at the Troika and the EFSF are barely documenting their handling of public funds. "It is a scandal that the European Commission publishes hundreds of pages of reports but fails to specify where the money went to exactly", Mittendrein explains. "We call upon those responsible to impose real transparency and prove who is actually benefiting from the payments."

Radical change of policy is overdue
A radical change of course is overdue in European crisis management policy. "Our governments save European banks and the wealthy with billions and billions of public funds while pretending to their voters that the money is transferred to the Greek population. This has to stop", Mittendrein and Frangakis demand. Banks "too-big-to-fail" have to be split and return to serving public welfare instead of private profits. Creditors and the rich have to pay their share of the crisis' costs while the financial sector must be severely regulated. "After three years of devastation caused by imposed austerity, Greece is in need of real rescue packages that actually reach the general population", Lisa Mittendrein concludes.

More bizarre details
Moreover, the investigation conducted by ATTAC brought to light several bizarre details of the so-called "Greek bail-out":

  • Several times, EU and IMF reneged on their announcements and withheld promised disbursements by weeks or even months to put pressure on Greek democracy: in autumn 2011 to prevent a referendum on austerity policy; in May/June 2012 to raise the chances of Troika-friendly parties in the national elections. By withholding promised funds, the Troika forces the Greek government to issue short-term bonds to avoid imminent bankruptcy. Since those "treasury bills", maturing within a few weeks or months, carry a higher interest rate, this actually increases Greek government debt. This serves as further evidence that debt reduction is not the Troika's main interest, but rather a pretext to push forward the destruction of the welfare state and workers' rights.
  • A tranche of €1 billion disbursed in June 2012 was primarily used to finance Greece's compulsory contribution to the EFSF-replacement ESM. Thus, the EFSF financed its own successor – yet not directly but by raising Greek government debt.
  • Klaus Regling, managing director of EFSF and ESM, has switched between politics and the financial sector numerous times during his career. Before joining the EFSF, he worked in turn for the German government, the hedge fund Moore Capital Strategy Group, the European Commission's Directorate-General for Economic and Financial Affairs and the hedge fund Winton Futures Fund Ltd. Regling thus stands as a symbolic example of the intertwining between financial markets and politics which partly explains why the EU's crisis management policy is primarily aimed at saving the financial sector.
  • According to its Annual Accounts, the EFSF's personnel costs amounted to €3,1 million in 2011. (9) According to media reports, 12 people worked for the EFSF in this year, (10) so an average €258.000 was spent per person. Managing director Klaus Regling allegedly earns €324.000 plus extra pay per year (11). People making these amounts of money supervise the reduction of the Greek gross minimum wage to €580 per month (€510 for youths) (12).