Maria Lucia Fattorelli [1]
Greece is facing a huge debt problem and a humanitarian crisis. The situation now is many times worst than it was in 2010, when the Troika – IMF, EU Commission and ECB – imposed its “bailout plan”, justified by the necessity to support Greece. In fact, such plan has been a complete disaster for Greece, which has had no benefit at all out of the peculiar debt agreements implemented since.
What almost no one talks about is that another successful bailout plan effectively took place at that time in 2010, although not for Greece, but in benefit of the private banks. Behind the Greek crisis there is a huge illegal bailout plan for the private banks. And the way it is being done represents an immense risk for Europe.
After five years, the banks got everything they wanted. Greece, instead, got into a real tragedy: the country has far deepened its debt problem, lost State assets as the privatization process was accelerated, as well as shrunk its economy drastically. Most of all, it has had an immeasurable social cost represented by the lives of thousands of desperate people who had their livelihood and their dreams impacted by the severe austerity measures enforced since 2010. Health, education, labour, assistance, pensions, salaries and all other social services have all been destructively affected.
The distribution of the Greek National Budget shows that debt expenses prevail over all other State expenses. In fact, the loans, other debt obligations, interests and other costs cover 56% of the budget:
Source: Εισηγητική Έκθεση Απολογισµού και Ισολογισµού 2013 – p. 90. Elaborated by Stavros Papaioannou.
In May 2010, at the same time all attentions were focused on the abundant announcements about the interference of the Troika in Greece, with its peculiar “bailout” plan, another effective bailout plan and a set of illegal measures to rescue the private banks was also being approved, but no attention was being paid on these ones.
In one shot, justified by the necessity to “preserve financial stability in Europe”, illegal measures were taken in May 2010, in order to provide the apparatuses that would allow the private banks to get rid of the dangerous “bubble”, i.e., the great amount of toxic assets – mostly dematerialised and non marketable assets – that loaded their off-balance [2] sheets accounts. The main objective was to help the private banks to transfer such problematic assets to the European countries.
One of the measures adopted to accelerate the exchange of assets from private banks and settle the bank crisis was the SMP program [3], which allowed the European Central Bank (ECB) to do direct purchases of public and private debt securities on primary and secondary markets. The operation related to public debt securities is illegal under Article 123 of the EU Treaty [4]. This program is one among several “non-standard measures” then taken by the ECB.
The creation of a “Special Purpose Vehicle” company based in Luxembourg was another very important measure to help transfer dematerialised toxic assets from the private banks into the public sector. Believe it or not, the European countries [5] became “partners” of this private company, a “societé anonime” called European Financial Stability Facility (EFSF) [6]. The countries committed with billionaire guarantees, which was initially set on the amount of EUR 440.00 billion [7] and then, in 2011, was raised to EUR 779.78 billion [8]. The real purpose of this company has been shadowed by the announcements that it would provide “loans” to countries, based on “funding instruments”, not real money. Utterly, the creation of EFSF was an imposition from IMF [9], which gave it a support of EUR 250 billion [10].
Together, the SMP and the EFSF represent a crucial complementary asset relief scheme [11] the private banks needed to conclude the public support that had been initiated in the beginning of the 2008 bank crisis in the United States and also in Europe. Since early 2009 they had been applying for more public support to discharge the excessive amount of toxic assets loading their off-balance items. The solutions could be either the direct government purchases, or the transference of assets to independent asset management companies. Both tools were provided by the SMP and the EFSF, and the losses related to the toxic assets are being shared amongst the European citizens.
The exchange of toxic assets from private banks to a company through simple transference, without payment and a proper buy/sell operation would be illegal according to the accountability rules [12]. EUROSTAT changed these rules and allowed, “liquidity operations conducted through exchange of assets”, justifying it by the “specific circumstances of the financial turmoil”.
The main reason the EFSF was based in Luxembourg was to escape from being submitted to international laws. Besides, the EFSF is also financed by the IMF, whose collaboration would be illegal, according to its own statutes. Although, the IMF also changed its rules in order to provide the EUR 250 billion collaboration to EFSF [13].
According to the Act [14] that authorized its creation, the EFSF Luxembourg company could delegate the management of all funding activities; its board of directors could delegate their functions, and its associates Member States could delegate the decision-making related to guarantors to the Eurogroup Working Group (EWG). At that time, the EWG not even had a full-time President [15]. The German Debt Management Office [16] is the one who actually operates EFSF, and, together with the European Investment Bank, provide support to the operational functioning of EFSF. Its lack of legitimacy is evident, as it is actually operated by a diverse body. EFSF is now the major Greece creditor.
The funding instruments EFSF operates are the most risky and restricted ones, dematerialized, not marketable, such as Floating Rate Notes settled as Pass-trough, currency and hedge arrangements, and other co-financing activities that involve the British Trustee Wilmington Trust (London) Limited [17] as the instructor for issuing restricted type of not-certified bonds, which cannot be commercialized in any legitimate stock market, because they don’t obey the rules for sovereign debt bonds. This set of toxic funding instruments represent a risk to the Member States whose guarantees can be called to pay for all Luxembourg company financial products.
A large proportion scandal would have taken place in 2010 if these illegal schemes had been revealed: the violation of the EU Treaty, the arbitrary changes in the procedural rules by the ECB, EUROSTAT and IMF, as well as the association of Member States to the Luxembourg private special purpose company. All of that just to bailout private banks, at the expense of a systemic risk for the whole Europe, due the States commitment with billionaire guarantees that would cover problematic not marketable dematerialized toxic assets.
This scandal never took place, because the same EU Economic and Social Affairs Extraordinary Meeting [18] that discussed the creation of the “Special Purpose Vehicle” EFSF company in May 2010 gave a special importance to the “support package for Greece”, making it appear that the creation of this scheme was for Greece and that by doing so, it would ensure fiscal stability in the region. Since then, Greece has been the center of all attentions, persistently occupying the headlines of the main media vehicles all over the world, while the illegal scheme that has effectively supported and benefited the private banks remains on the shadows, and almost nobody talks about it.
The Bank of Greece annual report shows an immense increase of the “off-balance” accounts related to securities in 2009 and 2010, on amounts much greater them the total assets of the Bank, and this pattern continues on the following years. For example, on the Bank of Greece 2010 Balance Sheet [19] , the total of assets in 31/12/2010 was EUR 138.64 billion. The off-balance accounts on that year reached EUR 204.88 billion. In 31/12/2011 [20], as the total balance assets summed EUR 168.44 billion; the off-balance accounts hit EUR 279.58 billion.
Thus, the transference of toxic assets from the private banks into the public sector has been a great success: for the private banks. And the Debt System [21] is being the tool to hide that.
Greece was brought into this scenario after several months of persistent pressure from the UE Commission about allegations of inconsistencies on the statistics data and the existence of an excessive deficit [22]. Step by step a big deal was created over those issues, until May 2010, when the Economic and Financial Affairs Council stated: “in the wake of the crisis in Greece, the situation in financial markets is fragile and there was a risk of contagion” [23]. And so Greece was submitted to the package that included the interference of the Troika with its severe measures under annual adjustment plans, an odd bilateral agreement, followed by EFSF “loans” backed on risky funding instruments.
Greek economists, political leaders, and even some IMF authorities had proposed that restructuring the Greek debt would provide much better results than that package. This was ignored.
Critical denounces about the super estimation of the Greek deficit – which had been the justification for the creation of the big deal around Greece and the imposition of the package in 2010 – were likewise ignored.
The serious denunciations made by Greek specialists [24] about the falsification of statistics were also disregarded. These studies showed that the amount of EUR 27.99 billion loaded the public debt statistics in 2009 [25], because of untrue augmentation on certain categories (such as DEKO, Hospital arrears and SWAP Goldman Sachs). Previous years statistics had also being affected by EUR 21 billion of Goldman Sacks swaps distributed ad hoc in 2006, 2007, 2008 and 2009.
Despite all this, under an atmosphere of urgency and threat of “contagion”, peculiar agreements have been implemented since 2010 in Greece; not as a Greek initiative, but as conformed by the EU authorities and the IMF, attached to the accomplishment of a complete set of prejudicial economic, social and political measures imposed by the Memorandums.
The analysis of the mechanisms [26] inserted on those agreements show they didn’t benefit Greece at all, but served the interests of the private banks, in perfect accordance to the set of illegal bailout measures approved on May 2010.
First, the bilateral loan used a special account in the ECB by which the loans disbursed by the countries and KfW, the lenders, would go straight to private banks that held far-below par value existing debt securities. So, that peculiar bilateral agreement was arranged to allow full payment for those bondholders while Greece didn’t get any benefit. Instead, the Greeks will have to pay back the capital, high interest rates and all costs.
Second, the EFSF “loans” resulted in the recapitalization of Greek private banks and the exchanging and recycling of debt instruments. Greece has not received any real loan or support from EFSF. Through the mechanisms inserted on the EFSF agreements, real money never arrived in Greece, but only toxic dematerialized assets that fill the off-balance section of the Bank of Greece balance sheet. On the other hand, the country was forced to cut essential social expenses to pay back, in cash, the high interest rates and all abusive costs, and also will have to repay the capital it has never received.
We must look for the reason why Greece has been chosen to be on the eye of the storm, submitted to illegal and illegitimate agreements and memorandums, serving as the scenery to cover the scandalous illegal bailout of the private banks since 2010.
Maybe this humiliation is related to the fact that Greece has been historically the worldwide reference for humanity, as it is the cradle of democracy, the symbol for ethics and human rights. The Debt System cannot admit those values, as it has no scruple to damage countries and peoples to obtain their profits.
The Greek Parliament has already installed the Truth Committee on Public Debt and gave us the chance to reveal those facts; so necessary to repudiate the Debt System that subjugates not only Greece, but also many other countries under the exploitation of the private financial sector. Only through transparency the countries will defeat those who want to put them on their knees.
It’s time for the truth to prevail, the time to place human rights, democracy and ethics over any lower interests. This is a task for Greece to take on right now.
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[1] National Coordinator of Citizen Debt Audit in Brazil (www.auditoriacidada.org.br), invited by the president of Greek Parliament MP Zoe Konstantopoulou to collaborate with the Truth Committee on Public Debt created in April 4, 2015.
[2] Off-balance means a section outside of the normal balance sheet accounts, where the problematic assets, as the dematerialized not marketable assets are informed.
[3] Securities Markets Programme (SMP) – EUROPEAN CENTRAL BANK. Monetary policy glossary. Available from:
https://www.ecb.europa.eu/home/glossary/html/act4s.en.html#696 [Accessed: 4th June 2015]
[4] THE LISBON TREATY. Article 123. Available from: http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html [Accessed: 4th June 2015]
[5] The euro-area Member States or EFSF Shareholders: Kingdom of Belgium, Federal Republic of Germany, Ireland, Kingdom of Spain, French Republic, Italian Republic, Republic of Cyprus, Grand Duchy of Luxembourg, Republic of Malta, Kingdom of the Netherlands, Republic of Austria, Portuguese Republic, Republic of Slovenia, Slovak Republic, Republic of Finland and Hellenic Republic
[6] The private company EFSF was created as an instrument of the EUROPEAN FINANCIAL STABILISATION MECHANISM (EFSM), as in: http://ec.europa.eu/economy_finance/eu_borrower/efsm/index_en.htm
[7] EUROPEAN COMMISSION (2010) Communication From the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the Economic And Social Committee and the Committee of the Regions – Reinforcing economic policy coordination.
http://ec.europa.eu/economy_finance/articles/euro/documents/2010-05-12-com(2010)250_final.pdf – Page 10.
[8] IRISH STATUTE BOOK (2011) European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. Available from: http://www.irishstatutebook.ie/2011/en/act/pub/0025/print.html#sec2 [Accessed: 4th June 2015].
[9] Statement made by Mr. Panagiotis Roumeliotis, former representative of Greece at the IMF, to the “Truth Committee on Public Debt”, at Greek Parliament, on June 15th 2015.
[10] EUROPEAN FINANCIAL STABILITY FACILITY (2010) About EFSF [online] Available from:
http://www.efsf.europa.eu/about/index.htm and http://www.efsf.europa.eu/attachments/faq_en.pdf – Question A9 [Accessed: 3 June 2015].
[11] HAAN, Jacob de; OSSTERLOO, Sander; SCHOENMAKER, Dirk. Financial Markets and Institutions – A European Perspective (2012) 2nd edition. Cambridge, UK. Asset relief schemes, Van Riet (2010) Page 62.
[12] EUROSTAT (2009) New decision of Eurostat on deficit and debt – The statistical recording of public interventions to support financial institutions and financial markets during the financial crisis. Available from:
http://ec.europa.eu/eurostat/documents/2995521/5071614/2-15072009-BP-EN.PDF/37382919-ebff-4dca-9175-64d78e780257?version=1.0 [Accessed: 4th June 2015]
[13] “Most Directors (…) called for the Fund to collaborate with other institutions, such as the Bank for International Settlements, the Financial Stability Board, and national authorities, in meeting this goal.” In IMF (2013) Selected Decisions. Available from: http://www.imf.org/external/pubs/ft/sd/2013/123113.pdf – Page 72. [Accessed: 4th June 2015]
[14] EUROPEAN FINANCIAL STABILITY FACILITY ACT 2010. EFSF Framework Agreement, Article 12 (1) a, b, c, d, and (3); Article 10 (1), (2) and (3); Article 12 (4); Article 10 (8).
[15] Only from October 2011 on, according to a Council Decision on April 26th , 2012, EWG has full-time president:
OFFICIAL JOURNAL OF THE EUROPEAN UNION (2012) Official Decision. Available from:
The same person, Thomas Wieser, had been the president of the Economic and Financial Committee (EFC) from March 2009 to March 2011: COUNCIL OF THE EUROPEAN UNION. Eurogroup Working Group. Available from:
http://www.consilium.europa.eu/en/council-eu/eurogroup/eurogroup-working-group/
[16] EUROPEAN FINANCIAL STABILITY FACILITY (2013) EFSF general questions. Available from:
http://www.efsf.europa.eu/attachments/faq_en.pdf – Question A6. [Accessed: 4th June 2015].
See also: Germany Debt Management Agency has issued EFSF securities on behalf of EFSF.
EUROPEAN FINANCIAL STABILITY FACILITY (2010) EU and EFSF funding plans to provide financial assistance for Ireland. Available from:
http://www.efsf.europa.eu/mediacentre/news/2010/2010-006-eu-and-efsf-funding-plans-to-provide-financial-assistance-for-ireland.htm [Accessed: 4th June 2015]
[17] Co-Financing Agreement, PREAMBLE (A) and Article 1 – Definitions and Interpretation “Bonds”. Available at http://crisisobs.gr/wp-content/uploads/2012/02/7-co-financing-agreement.pdf [Accessed: 4th June 2015]
These bonds are issued on dematerialized and not certificated form. Have many restrictions because they are issued directly for a certain purpose and not offered in market, as the Securities Laws and SEC rules determine. They are issued under an exception rule permitted only for private issuers, not for States.
[18] ECONOMIC and FINANCIAL AFFAIRS Council Extraordinary meeting Brussels, 9/10 May 2010. COUNCIL CONCLUSIONS
https://www.consilium.europa.eu/uedocs/cmsUpload/Conclusions_Extraordinary_meeting_May2010-EN.pdf
[19] BANK OF GREECE ANNUAL REPORT 2010. BALANCE SHEET p. A4 http://www.bankofgreece.gr/BogEkdoseis/Annrep2010.pdf
[20] BANK OF GREECE ANNUAL REPORT 2011. BALANCE SHEET p. A4. http://www.bankofgreece.gr/BogEkdoseis/Annrep2011.pdf
[21] Expression created by the author after verifying, trough several debt audit procedures in different instances, the misuse of the public debt instrument as a tool to take resources from the States, instead of supporting them, by functioning as a set of gears that relates the political system, the legal system, the economic model based on adjustment plans, the big media and corruption.
[22] 24 MARCH 2009 – Commission Opinion – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-05/2009-03-24_el_104-5_en.pdf
27 APRIL 2009 – Council Decision – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-06_council/2009-04-27_el_104-6_council_en.pdf
10 NOVEMBER 2009 – Council conclusions – http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111025.pdf
8 JANUARY 2010- Commission Report – http://ec.europa.eu/eurostat/documents/4187653/6404656/COM_2010_report_greek/c8523cfa-d3c1-4954-8ea1-64bb11e59b3a
2 DECEMBER 2009 – Council Decision – https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111706.pdf
11 FEBRUARY 2010 – Statement by Heads of States or Government of the European Union. – http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/112856.pdf
16 FEBRUARY 2010 – Council Decision giving – http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-09_council/2010-02-16_el_126-9_council_en.pdf
[23] 9/10 MAY 2010 – Council Conclusions – Extraordinary meeting – Under the justification of the “crisis in Greece”, the scheme measures to rescue banks are implemented.
https://www.consilium.europa.eu/uedocs/cmsUpload/Conclusions_Extraordinary_meeting_May2010-EN.pdf
10 MAY 2010 – Council Decision –
http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/104-09_council/2010-05-10_el_126-9_council_en.pdf
[24] Prof. Zoe Georganta, Professor of Applied Econometrics and Productivity, Ex member of ELSTAT board’s contribution to “The Truth Committee on Public Debt” 21 May 2015.
[25] HF International (2011) Georgantas says 2009 deficit was purposely inflated to put us in code red. Available from: http://hellasfrappe.blogspot.gr/2011/09/shocking-report-official-admist-2009.html
[26] The mechanisms are summarized on Chapter 4 of the Preliminary Report presented by the Truth Committee on Public Debt on June 17th 2015. Available from: http://www.hellenicparliament.gr/UserFiles/8158407a-fc31-4ff2-a8d3-433701dbe6d4/Report_web.pdf
