There has been widespread horror at the rise of the far right Golden Dawn party in the recent Greek elections (they polled 7%), with appalled references to the activities of their “t-shirted thugs”. They are indeed nasty pieces of work, but the real damage to Greek society, and the reason for the rise of the fascists in the first place, is being done by thugs wearing pinstriped suits who are pauperizing the Greeks to protect powerful financial interests.
One such gentleman is speaking at the Institute of International and European Affairs (IIEA) in Dublin on Wednesday 16th May. Charles Dallara is Managing Director of the Institute of International Finance (IIF) and was previously a Managing Director at investment bankers J.P. Morgan. Prior to that again, he was a senior financial official in the US government under Presidents Bush (the senior) and Reagan. In Ireland he is talking about ‘Lessons from the Greek Debt Exchange’, which he is indeed an expert on because he represented the financial industry in the negotiations that, according to the IIEA website, “secured the largest debt restructuring in world history, involving €206 billion worth of bonds”.
The IIF is a lobby group set up by the world’s largest banks and financial institutions and it represents them in negotiations on any restructuring of sovereign debt. The usual powerhouses are there – like Goldman Sachs – but so also are banks from smaller countries, with both Allied Irish Bank and Bank of Ireland members. In the negotiations on Greece, the IIF actually had people they knew well on both sides of the table: Petros Christotoulou was a leading member of the Greek negotiating team but his previous jobs had been with Goldman Sachs and the Greek National Bank (a private bank that was part of the IIF ‘task force’ for Greece); the prime minister’s chief economic advisor was on sabbatical from Eurobank EFG, another member of the IIF Greek ‘task force’. Corporate Europe Observatory has also documented how the IIF had privileged insider access to other EU heads of state during the Greek negotiations.
Is it therefore any great surprise that the debt restructuring deal arrived at favoured the financial sector? Creditors are to get approximately 50% of the nominal value of their Greek bonds, but this needs to be seen in the context of those bonds trading at around 36% of their face value on the secondary market. In addition, they get €30 billion in cash, another 15% of the total bond value. To say that they are getting off lightly is putting it mildly. And the replacement bonds issued to the private sector are to be serviced from an escrow (third party) account and are guaranteed under UK and Luxembourg law – this new, ‘harder’ debt is being placed out of the reach of Greek people and Greek law. Five Greek professors of constitutional law have cited this as one of the reasons why they believe the deal to be in violation of the Greek constitution. Deposits held by public companies and institutions were converted by the Greek Central Bank into bonds and obliged to participate in the debt restructuring – universities have lost €87 million as a result and pension funds a staggering €12 billion.
The notorious Goldman Sachs loan of €5 billion, a piece of financial chicanery that helped the Greek government cook the books from 2002 and make its finances look better than they really were, has not been included in the debt exchange – they get off scot free. This will doubtless come as a source of joy to Peter Sutherland, chairman of Goldman Sachs International, who himself addressed the IIEA last September on the subject of the Eurozone crisis – though without reference to his company’s role in creating it.
Meanwhile, Greece’s public debt has been increased, as documented by the Greek debt audit campaign. While €105 billion of private debt was written off, new debt of an estimated €137 billion was taken on: €109 billion to eurozone institutions and €28 billion to the IMF, with €37 billion left over from the first ‘bailout’ package. As Greek economist Costas Lapavitsas puts it, “EU policy has thus succeeded in transforming a debt problem between a state and its private lenders into a debt problem among states and bilateral organisations”, a point recognized even by the conservative Wall Street Journal.
The savage austerity being imposed on Greek people has not been in any way mitigated, in fact it has been made worse: pensions and wages are still being slashed (many people are trying to live on wages of €300-400 per month), 150,000 public sector workers have been or are being made redundant, unemployment is shooting upwards towards 30%, social services are being cut, and state companies privatised. Last month, Dimitris Christoulas, a 77-year old retired pharmacist, committed suicide outside the Greek parliament, saying in a note he left behind that it would be better to have a “decent end” than scavenge in the “rubbish to feed myself”. We can safely assume that this note will not be referred to at the IIEA meeting on Wednesday when a financial terrorist is being feted.
Latest posts by Andy Storey (see all)
- Working Hard to Maintain the Status Quo - December 15, 2014
- Phil Hogan, the Embodiment of the Crony Capitalist Links Between Business and Politics in Ireland - September 10, 2014
- Bomb the Bad Guys and Save the Innocents - August 30, 2013
- Arms Sales, Debt and Corruption - April 19, 2013
- Irish Troops in Mali - March 12, 2013