by Michael Roberts
One of the cruel ironies of the last minute deal between the
Eurogroup and the Greek government for a four month extension to the
existing ‘aid’ programme monitored by the Troika is that in any sane
meaning it is not aid at all.
In return for staying in the Troika programme for another four months
to end-June and keeping to the still to be agreed conditions on fiscal
targets, government spending and privatisations, the Eurogroup, the ECB
and the IMF will disburse the outstanding tranches of loans under the
existing programme. The FT might call this “aid” but it is nothing of
the kind. It is not even bailout money for Greek banks. The €11bn
funding for that has been returned by the Greeks to the Troika who are
keeping it for ‘security’.
Between the beginning of March and the end of June, the financing
institution of the Eurogroup, the EFSF, will release €1.8bn, while the
ECB will return profits that it has made on maturing Greek government
bonds that it purchased in 2014 worth €1.9bn and the IMF will disburse
another €3.6bn in funds under its programme of ‘aid’ that lasts until
April 2016. That’s €7.2bn.
But most of that will be immediately recycled back to the Troika as
repayments of debt and interest for previous loans and government bonds
that are maturing. In the upcoming four months, the IMF must be paid
back €5.3bn while the Greeks must also roll over short-term T-bills
bought by the Greek banks worth about €11bn. So the Troika ‘aid’ will
just disappear and the Greek people will see none of it to help with
government spending.
And what happens after the end of June? Any new programme with the
Troika (if that is what Syriza decides to do) will involve yet more
repayments, including €6.7bn to be paid back to the ECB on maturing
government bonds in July alone, and with more to the IMF. It is never
ending.
This is just like ‘Third World’ aid that used to be distributed by
the World Bank and other international agencies back in the 1980s and
1990s. Most of this ‘aid’ ended up in corrupt dictators’ pockets or in
repaying previous debt. The people never saw it. And the debt levels
stayed where they were, as they do for Greece now.
Back then, eventually the international agencies agreed what was
called a Brady debt swap that wrote off a portion of the debt that could
never be repaid. No such plan is available to Greece, although Syriza
asked for it in their negotiations with the Eurogroup.
The debt to the Troika remains fully on the books and, as a share of
Greek GDP, is set to rise. Sure, the cost of servicing this debt is
relatively low with repayments on the EU part of the loans put off until
the next decade and interest on these loans at very low rates. But the
debt liability is there forever – like the proverbial albatross on the
back.
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